RDC’s 24th Annual Conference Presentations
Jacob Adams, President, Arctic Slope Regional Corporation
Introduction
Good afternoon. It is good to be here among friends again, speaking on issues that are so important to our state, and presently, so dynamic and full of promise, in spite of the major setbacks Alaska suffered in the Energy Bill. I am especially fond of today’s theme, “New Frontiers and Expanding Opportunities”, because it so closely mirrors the situation faced by Arctic Slope Regional Corporation and its subsidiary companies. Within the past few years we have seen many challenges at our corporation. As a parent corporation we have taken on new initiatives to overcome some of these challenges. We have also changed the shape and mission of our oilfield subsidiaries with the same goal in mind – an increased role in the exploration and production of Alaska’s resources – while we continue to look at ASRC integration and value-added operations in the growth of our exploration and production capabilities.
ASRC recognizes that any expanded opportunities take work and diligence; they are not going to be given to us in a “pool of oil”. ASRC is stepping up to the opportunities, increasing its internal capacity to become a legitimate partner for exploration and development on the North Slope. In this regard we are unique; a capable, qualified Alaska Native Corporation whose roots are in the very area of development – the North Slope of Alaska.
Rather than passively waiting for resource development to hit or miss its Native-owned lands, ASRC has made a calculated shift toward increasing our role in all aspects of North Slope exploration and production.
We have partnered with the explorers and producers and are targeting lands not for their ownership status, but for their resource potential.
The meaning of “New Frontiers” also has a special ring to our corporation. ASRC is challenging internal “frontiers” – in areas of newly-developed capacity. At the same time explorers are challenging the frontiers of geography, and exploration and development techniques. And, these new frontiers are in our back yard. They are in many cases the “old frontiers” – namely North Slope foothills, NPR-A and the Western Arctic, and the targets of North Slope gas and heavy oil. The “New Frontiers” also include the coal and mineral wealth of the North Slope and northwest Arctic. These areas were long ago tested by resource exploration and yet still hold much promise for Alaska’s future. For ASRC, out ‘New Frontier’ is in the oil and gas industry’s ‘Old Frontier’ – mainly the mature fields of Prudhoe Bay, Kuparuk River, Milne Point among others.
Exploration and Production Opportunities
ASRC’s focus on exploration and production opportunities is timely. Today the North Slope is witness to a growing family of new explorers. We welcome the entry of Armstrong, Pioneer, and Petro-Canada who are working with ASRC and applying a fresh approach to exploration. They are following the lead of companies like Anadarko, challenging old ideas, adjusting to a changing world and testing new ground. We see these companies as potential future partners. In many instances they are sized right for the task, and they can make their explorations dollars stretch.
Oil and gas producers require qualified investment partners, and ASRC has realized true participation and a seat at the table when evaluating North Slope development opportunities. Our new ASRC/BP Strategic Alliance holds promise for ASRC to develop our capacity to become a working interest owner and operator in our backyard, Alaska’s North Slope.
ASRC’s investment in mentored exploration and development is good for everybody. It allows for exploration to continue that may not meet the large oil companies hurdle rates. Under our agreement ASRC has access to BP’s in-unit prospect inventory. This gives ASRC the opportunity to look at lower-risk, shorter cycle time projects than we would otherwise realized through a traditional lease acquisition approach. It gives us a huge “JUMPSTART” and we appreciate the efforts that BP has put forth on our behalf. The agreement also provides for ASRC to mentor under BP allowing us to grow our internal capacity to become an independent E & P operator on the North Slope.
We believe, as I said earlier, that our alliance with BP is good for everyone – it is ‘breaking new trail’ bringing us back to the today’s theme of “New Frontiers and Expanding Opportunities”. We are creating a new way forward for our partner, BP, to rationalize their business and concentrate in other areas of their value-chain. BP gains an important local partner and spreads the risk and cost of in-unit exploration and development.
On another ‘Frontier’, ASRC has recently capitalized on a unique opportunity – one that is shared with the Nuiqsut village corporation, Kuukpik Corporation – to acquire an interest in the Alpine Transportation Company which transports oil from the Alpine field. This is a strategic investment for ASRC as we see future satellite development in the Colville River Delta around Alpine and west into the NPR-A. Our equity purchase also helps ASRC offset our financial sensitivities to our royalty oil from Alpine due to fluctuating oil price.
New Frontiers in the Western Arctic
I am happy to share the table this afternoon with my friends and neighbors from northwest Alaska, Helvi Sandvik of NANA and Bob Jacko of Teck-Cominco. In the lands that straddle our two regions, there is a nexus of interests in creating an expanded transportation hub for the mineral wealth of Northwest Alaska. ASRC, NANA, and the two northern boroughs have pledged to work on all the issues related to this major project.
The attitude of inter-regional cooperation is unprecedented yet critical to the success of any project of this magnitude in our region. Presently, we are looking forward to the completion of the feasibility study of the DeLong Mountains Terminal, otherwise known as the Red Dog portsite. A lot of you in the audience have heard me talk in the past about ASRC’s vast reserves of high quality coal in the western arctic. The portsite expansion is very important to ASRC’s continued feasibility on how to monetize our coal resources.
A coal mine in the western arctic could provide over 300 jobs year round and create a local economy in an economically depressed area of the Arctic. The mine could also provide electricity for new project development and local community use. An expanded port at the portsite is essential to the transportation of the billions of tons of ASRC-owned coal that is poised for development in the northwest Arctic. It is also necessary for the development of the mineral wealth of the northwest Arctic.
However, ASRC was disappointed to learn that the effort is currently stymied by the US Environmental Protection Agency. The EPA has failed to issue a timely review of a draft environmental impact statement that is a necessary precursor to the feasibility study. The EPA has also elected to follow agendas within their organization and is now asking for information in the DEIS that was not part of the study’s original scope. The result is the EPA is delaying the completion of a feasibility study for an expanded port site in northwest Alaska.
The Challenge
While ASRC is entering into ‘New Frontiers” both internally and externally through our desire to become an Alaska Native Corporation North Slope Independent, our subsidiary, ASRC Energy Services (AES), is ‘Expanding Opportunities’ by transitioning its outsourcing option for the oil and gas industry. These include: Engineering and Production services, Drilling Engineering, Completion and Stimulation design and Well Testing. AES changes are also strengthening the base capabilities in Operations & Maintenance, Construction (both Pipeline and Facility) and Facility Engineering. Our capability in these sectors, along with our refining operations at Petrostar, gives us the ability to create value from the “Formation to the Pump Station”.
New Ways of Looking at Old Issues
New frontiers and expanded opportunities mean new ways of looking at old issues. ASRC is eager to take part in applying this mindset to some of the longstanding areas offering huge potential, including the oil wealth contained in heavy oil deposits and the untested prospects currently locked in the ANWR lands that surround our village of Kaktovik. One obstacle is technical, and the other is political. We strive to be innovative and capable in unlocking the potential of both. Pending action in the United States Congress has very disappointingly excluded the possibility of ever opening the coastal plain of ANWR. It is the first time I have agreed with the environmentalist when they said the Energy Bill does nothing to reduce foreign oil dependency.
The natural gas resources of the North Slope face a mixture of technical, economic and political hurdles. ASRC continues to support a project that will add value to both the known gas resources as well as the highly prospective gas-prone lands of ASRC in the foothills of the Brooks Range.
Conclusion
The changes at ASRC reflect our response to changing times. They are based on our desire to develop newer, more efficient ways of meeting today’s opportunities. We are strengthening ourselves and covering new ground. We are positioning ourselves for growth: Growth in our internal capacities, in our industry and regional partnerships, and in our desire to challenge Alaska’s resource development frontiers. And at the same time continue to ensure that our people’s way of life is protected by reasonable development.
