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Made in Alaska Native regional corporation aims to be independent North Slope producer Kay Cashman Petroleum News Publisher & Managing Editor
Arctic Slope Regional Corp., a company representing the business interests of 9,000 Inupiat Eskimos, is expanding its scope to become an independent oil and gas producer in its own backyard — i.e. the petroleum-rich North Slope of Alaska.
As the “next step” in its evolution from oilfield service provider and land owner/manager, ASRC has entered into a “mentoring” agreement with major North Slope producer BP Exploration (Alaska), the state’s largest investor and one of the biggest oil and gas companies in the world.
The agreement, signed March 20, “establishes a framework for sharing data and technical knowledge” between the two companies, including information on unit and near-unit oil and gas investment opportunities on the North Slope, ASRC and BP company executives told Petroleum News in early July.
Specific opportunities for ASRC to participate in exploration and development activities will be “subject to individual negotiation,” the companies said.
No specific exploration or development deals have been cut yet, but Conrad Bagne, ASRC’s chief administrative officer and in-house counsel, said the companies hope to “have something identified by fall and, potentially, if it comes together, an agreement by the end of the calendar year.”
As for being able to drill on the North Slope this coming winter, he said that was a “very desirable” possibility, but a “challenge” given the timeframes involved with permitting exploration activities. For BP: More Alaska prospects could get developed For BP, the agreement will help get unit and near-unit North Slope prospects explored and developed that might not get approved by the company’s board in London due to stiff competition from investment opportunities outside Alaska.
“Any opportunities that we have in Alaska ... have to compete against opportunities we have around the world. That applies to development opportunities, the gas pipeline, the 125 wells we’ll drill this year and the 125 wells we’ll probably drill next year,” BP’s president in Alaska, Steve Marshall, said. “The criteria for those are set higher and higher and we allocate dollars where we think we’ve got the best chance of return, of finding big fields. This agreement is … hopefully going to provide an opportunity for a company like ASRC to invest where BP would choose not to.” For ASRC: jobs for shareholders For ASRC, the deal is expected to provide badly needed jobs close to home for its shareholders. The agreement, which ASRC said is designed to enhance its existing exploration, development and operating capabilities, helps the company take the next critical step toward being an independent producer in Alaska — a producer that Bagne points out is “an Alaska corporation, with its shareholder base in Alaska, that is going to be here forever.”
“This agreement provides a critical next step in providing ASRC with access to the tools and knowledge we need to become a competitive, independent producer in Alaska,” ASRC President and CEO Jacob Adams said. “It gives ASRC exposure to BP’s industry expertise and ‘best practice’ business experience, and it builds on capabilities that have been developed within our Land Department, energy services division and refining operations.” For the state: jobs, revenues For the state of Alaska, Marshall said, the agreement should spur oil and gas exploration and development on the North Slope and generate business for Alaska-based suppliers and service companies, as well as enhance career opportunities for Alaskans.
“This agreement … is a way to get what are highly attractive prospects, we hope, into exploration and development,” Bagne said, pointing out that ASRC Energy Services “might not be the only (service) company working on these opportunities because they provide services for other oil companies as well.” Talks began in 1999 The agreement between the two companies “grows out of a relationship which is made up of both the resource side and the oilfield service side of ASRC. There were discussions (with the resource side) that went on between ASRC and BP back at the time of the ARCO acquisition that started some of this dialogue,” Bagne said.
Talks between the two companies resumed about a year ago, shortly after BP announced it was going to stop all frontier exploration in Alaska.
Marshall said BP went to its oilfield contractors and said it was looking “for innovative ways” to do business, “not just to squeeze costs, but to … find new ways of working. ASRC has been very aggressive … and come forward with a number of ideas, of which this is one.”
“In the last year there was a lot of discussion … (between BP and) our service group,” Bagne said. ASRC’s oilfield service, construction and operating subsidiary recently changed its name from Natchiq to ASRC Energy Services in order to more closely align itself with its parent company. The service arm also restructured into three business units — operations and maintenance; pipeline, power and communications; and engineering and technology. (See “Natchiq rebranded,” in the April 27 edition of Petroleum News.)
The dialogues with BP “came together both on the resource side and the service side. … ASRC particularly pushed that agenda because we are in a unique position to be able to look at both the service and equity issues together,” Bagne said, noting that ASRC owns the mineral rights to prospective acreage in several areas in northern Alaska, including the Colville River area, Brooks Range Foothills and the coastal plain of the Arctic National Wildlife Refuge, where BP is a leaseholder with ChevronTexaco.
The deal will give the Native corporation access to land and resources it was precluded from selecting under the 1971 Alaska Native Claims Settlement Act. Mentoring has not yet begun Although the discussion of opportunities has begun, mentoring has not.
“We are still in the very early stages. We don’t have any employees working at ASRC — yet. That’s still to come. … There are a lot of things we need to work out … in terms of … logistics and … personnel issues. …Those aren’t barriers. They are just things we need to address,” Marshall said.
He said it was “too early to tell” how many BP employees will be working with ASRC: “A lot will depend on the opportunities we identify.”
Why the mentoring versus a more traditional farm-in agreement?
Marshall said even in-field exploration and development is “a risky business. … And it’s why we’re not just providing acreage; it’s about providing data and it’s also about trying to provide some intellectual capital through the mentoring.” Not frontier exploration, not Liberty Marshall said the agreement with ASRC does not involve the company’s acreage in ANWR, the one spot on the North Slope where BP has kept exploration leases that could produce the type of monster fields the company is currently seeking in other parts of the world.
Nor does the agreement involve any other type of frontier exploration: “This (agreement) is very much focused in and around the existing units,” such as “Prudhoe, Kuparuk, Endicott and Badami,” Marshall said.
When asked about the likelihood of a deal with ASRC for taking over the soon to be shut-down Badami field, he said, “We certainly have discussed Badami with ASRC but it’s really just in the formative stage at the moment, it’s just an idea.”
When asked about BP’s offshore Liberty prospect, Marshall said, “That’s an area we are still looking at very hard. It’s certainly not on my radar screen as a likely opportunity to be discussed with ASRC. … We are thinking very hard about whether or not a development scheme can be permitted there.”
When asked if the agreement could eventually lead to ASRC taking over BP’s operatorship of the giant Prudhoe Bay unit, Marshall said, “That’s not what this is intended to do from our perspective. The thing that Prudhoe Bay offers BP is a fantastic gas resource — in addition to all of the oil that is yet to be produced. It is still a field with a huge life and billions of dollars of investment both on the oil side and indeed on the gas side. So, it’s an area of strategic importance for BP.” Imm in charge of project Bagne said ASRC is “going to have to staff up. … We’re going to have to build our core staff for what will eventually become an operating oil company.”
Long-time ASRC Land Manager Teresa Imm is currently in charge of the ASRC-BP agreement.
Imm sees the arrangement between ASRC and BP as a “very mutually beneficial relationship. … BP is challenged for exploration dollars, for even unit exploration. Those are traditionally areas that are off-limits for a newcomer, for an independent or for a hope-to-be independent, like us.”
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