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THE INDEPENDENTS 2003: Native corporation turns independent ASRC aims to be North Slope oil and gas producer, signs mentoring agreement with BP Kay Cashman Petroleum News
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 — the petroleum-rich North Slope of Alaska.
As the “next step” in its evolution from land owner/manager with subsidiaries providing oilfield services, ASRC has entered into a “mentoring” agreement with major North Slope producer BP Exploration (Alaska), the state’s largest investor. Talks between the two began shortly after BP announced it was going to stop all frontier exploration in Alaska.
The agreement, signed March 20 “establishes a framework for sharing data and technical knowledge” between BP and ASRC, including information on unit and near-unit oil and gas investment opportunities on the North Slope, executives from both companies 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 had been cut as of Oct. 6, but Conrad Bagne, ASRC’s chief administrative officer and in-house counsel, said in July that the companies hoped 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.
More Alaska prospects 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. … 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,” BP’s president in Alaska, Steve Marshall, told Petroleum News in July.
Jobs for ASRC 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.”
The dialogues between the two companies “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.
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 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 Badami field, which was put into a warm shut-down mode in the summer of 2003, 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.”
Long-time ASRC Land Manager Teresa Imm is currently in charge of the ASRC-BP agreement.
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