Arctic Slope Regional Corp., the Alaska Native regional corporation for the North Slope, has acquired Shell’s oil and gas leases in the Camden Bay region of the Beaufort Sea, Rex Rock, ASRC president and CEO, told the Resource Development Council on Nov. 16. Along with the leases, ASRC is also obtaining the information and data for the Sivulliq and Torpedo prospects that Shell had been interested in evaluating, Rock said.
Camden Bay straddles an area north of the boundary between state North Slope land and the Arctic National Wildlife Refuge. Sivulliq and Torpedo are both in the western part of the bay, approximately north of the Point Thomson field. Sivulliq, previously called Hammerhead, has a known oil pool, thought to be about 100 million to 200 million barrels in size.
Lease transfer in progress
Teresa Imm, ASRC senior vice president of resource development, told Petroleum News that the transfer of the leases to ASRC still needs government agency approval but that the terms of the sale have been finalized with Shell. With questions raised over the likelihood of future lease sales for the Arctic outer continental shelf, ASRC had wanted to ensure that there are continuing OCS exploration and development options, Imm said.
The leases in question are nearing the ends of their primary terms - information on the Bureau of Ocean Energy Management’s website indicates that most of the leases expire around the end of October 2017.
“We’re looking at what the options are to extend the leases,” Imm said. “We’re working with the agencies.”
Asked about the challenging economics of working on the outer continental shelf at a time of relatively low oil prices, Imm commented that ASRC had conducted sufficient due diligence prior to acquiring the Shell leases.
“We certainly know what we’re getting ourselves into,” Imm said, adding that, until the transfer of the leases to ASRC is completed, it is too early to talk about specific plans for lease activity.
Direct involvement
In recent years ASRC, traditionally a group of service companies, has become directly involved in Arctic oil exploration, including exploration in its own onshore land holdings. Imm said that ASRC Exploration is the Native corporation’s subsidiary that is acquiring the Shell leases.
During his conference speech, Rock commented on the formation of Arctic Inupiat Offshore LLC, a company that ASRC and six North Slope villages had formed in 2014, to enable investment in Shell’s Chukchi Sea exploration program. Although Shell’s Chukchi program has come to an end, AIO “is still very much alive and is still very relevant,” Rock said.
Speaking a couple of days before the Department of the Interior announced the withdrawal of Beaufort and Chukchi sea lease sales from the next five-year outer continental shelf lease sale program, Rock argued for the need to keep those lease sales on the table.
Community importance
Reflecting also on recent onshore oil discoveries in Arctic Alaska, Rock commented on the importance of the oil and gas industry to the people of the north.
“Oil and gas development plays an essential role in the Arctic,” Rock said. “It is vital to our region, state and nation.”
Rock said that he hoped that the new onshore discoveries would soon be delineated and commented that environmental groups have already promised to stop any development.
“Development on- and offshore in the Arctic must be environmentally safe and culturally responsive, but it must be allowed to continue. That’s non-negotiable,” Rock said. “Slamming the door shut on opportunity does nothing to help my region or my people, either now or in the future.”
As the North Slope communities have been integrated into the cash economy, the oil industry provides an economic base, on which the communities can continue their subsistence way of life. Rock also argued for government regulation that is predictable and science based, with environmentally justifiable guidelines.
“They should not be designed to prohibit our chance of economic self determination,” he said.
Rock also questioned why goal setting associated with a recent Arctic agreement between Canada and the United States had not involved the Arctic people.
Risks and rewards
But when it comes to development in the Arctic, there are questions over who bears the risks and who reaps the majority of the rewards. All sides of the frontier exploration debate must participate in reasonable and meaningful conversations, to find a balance that is beneficial to all stakeholders, Rock said, adding that, as a whaling captain, he is familiar with carefully measuring the risks and rewards in embarking on an Arctic venture.
Given the ever-present risk of an Arctic oil spill, it is essential to be educated and prepared for that risk - the North Slope residents review and question every aspect of what OCS explorers are doing, Rock said.
And the formation of AIO in 2014 presented a new model for that balance of risk and reward, bringing the local people into the oil exploration decision making process.
“It was important for us to invest in the opportunity, so we had skin in the game and were a meaningful partner,” Rock said. “At the same time, our financial interests in the project promised us returns on our investment.”
Prior to the formation of AIO, the Arctic people had been skeptical about offshore development.
“Local involvement is key to success in the Arctic,” Rock said.
