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Vol. 19, No. 32 Week of August 10, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

ASRC, Shell form JV

Arctic Slope Regional Corp., 6 North Slope village corporations, create AIO

Kristen Nelson

Petroleum News

Arctic Slope Regional Corp. and six North Slope village corporations have created a new company, Arctic Inupiat Offshore LLC.

That new company, AIO, and Shell Gulf of Mexico have entered into a binding agreement to allow AIO the option to acquire an interest in Shell’s Chukchi Sea acreage and activities.

AIO said members include ASRC, Ukpeagvik Inupiat Corp., Tikigaq Corp., Olgoonik Corp., Kaktovik Inupiat Corp., Atqasuk Corp. and Nunamiut Corp. The six village corporations represent Barrow, Point Hope, Wainwright, Kaktovik, Atqasuk and Anaktuvuk Pass.

AIO said in a statement released July 31 that through the option agreement Shell would assign AIO an overriding royalty interest in oil and gas produced from specific Chukchi Sea leases, and AIO would have the option to participate in project activities by acquiring a working interest at the time Shell makes the decision to proceed with development and production.

AIO also said Shell and AIO will hold quarterly meetings to exchange information and address regional and development issues.

Rock, Edwardsen to head AIO

Rex A. Rock Sr., ASRC president and chief executive officer, will also serve as president of AIO.

“Our region has always been a leader in strategic partnerships that provide meaningful benefits to our shareholders, to our people,” Rock said in a statement. “I am humbled to acknowledge that this arrangement balances the risk of OCS development borne by our coastal communities with the benefits intended to support our communities and our people.”

Anthony E. Edwardsen, Ukpeagvik Inupiat Corp. president and chief executive officer, will serve as chairman of AIO.

“Our values teach us that we achieve success by putting the needs of our community at the center of what we do,” Edwardsen said.

“It is important that our community has a seat at the table to represent the subsistence and economic needs of our shareholders. Through AIO we will have meaningful input into this process while providing benefits back to our shareholders.”

Theresa Imm is the AIO general manager.

Shell sees opportunities for communities

Shell Alaska Vice President Pete Slaiby called it “an important day for our Alaska Venture.” He said a regional alliance with Alaska Native corporations “provides Shell the opportunity to collaborate with savvy and experienced North Slope business partners going forward. It also underscores our commitment to provide opportunities for North Slope communities to directly benefit from Shell’s activities offshore Alaska.”

Those activities were on hold the last two years.

Royal Dutch Shell Chief Executive Officer Ben van Beurden said at a July 31 second quarter earnings conference call that “Shell is opportunity rich and capital constrained.” As reported by Seeking Alpha, van Beurden said Shell will move ahead with growth projects where Shell is in the front-end engineering and design stage. But, he cautioned, the company will be “more selective on new FEEDs” and said the company’s executive committee is now reviewing FEEDs with a $500 million or greater cost.

Van Beurden said long-term plays like the Arctic and other frontier regions could deliver substantive new oil and gas fields, but said of Alaska that Shell is currently blocked by U.S. courts and won’t commit to drilling until those issues are resolved.

Simon Henry, Shell’s chief financial officer, said when Shell gets into Arctic drilling, “we want to be ready for it from a let’s say operational perspective. We want to be able to do this completely flawlessly.”

Shell began wells in the Chukchi and Beaufort seas in 2012 - the Beaufort Sea is not included in the joint venture with AIO - but did not drill in 2013 or 2014 due to legal issues with its leases and logistical problems the company encountered in moving the drilling rigs south after the 2012 drilling season.

AIO welcomed

Statewide elected officials praised the joint venture.

Alaska Gov. Sean Parnell lauded the creation of AIO and said “Shell’s partnership with the Alaska Native corporations that will provide a greater voice and opportunity for the people in the region and a seat at the development table. This establishes a very positive precedent in Alaska’s Outer Continental Shelf, showing strategic partnership among North Slope communities and Shell, both of which understand the importance of developing Alaska’s offshore oil and gas resources,” the governor said.

“This announcement ensures that the people of the North Slope Borough share directly in the oil and gas bounty off of their coast,” U.S. Sen. Lisa Murkowski, R-Alaska, said in a statement. “It gives locals a say in what happens near their communities. I think that’s a wise decision on Shell’s part.”

U.S. Sen. Mark Begich, D-Alaska, said it was exciting to see Alaska Native corporations “take a stake in responsible development in their backyard.” He said “it’s good to see Shell partner with local communities and corporations. Hopefully, we’ll see this partnership pay off in the very near future.”

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