Shell moved to deepen its relationship with Alaska natives who live near its Arctic oil wells, signing a deal that gives them royalties from some of the projects and an option to buy into them later.

The move came between Shell Oil Co. and a new company known as Arctic Inupiat Offshore, a joint venture of the native-owned Arctic Slope Regional Corp. and the North Slope village corporations.

The deal gives Alaska natives who already have a vested interest in the projects a financial incentive to see them move forward. And it could help ease tensions with some in the region who oppose offshore oil development in the same waters where they fish and hunt whale.

Phillip Tikluk, president of the Kaktovik Inupiat Corp., said in a news release that the collaboration will “bring financial stability and alignment to the village corporations across the North Slope from responsible offshore development.”

The deal also extends potential financial benefits of Shell’s Arctic drilling throughout the North Slope villages, even those where the company has not stationed support offices or hired local workers.

Shared benefits

Patrick Mekiana, president of the Nunamiut Corp., stressed that the partnership aligns most North Slope villages, giving even the inland community of Anaktuvuk Pass a chance “to benefit from responsible outer continental shelf development.”

Shell officials declined to discuss the financial terms of the deal, which has been in the works for several years.

The Arctic Slope Regional Corp. is a large Alaska Native company that has thousands of shareholders and more than a dozen individual enterprises, including an oil company and an energy service firm.

“We’ve taken on a business partner with decades of experience working and contracting in the region,” noted Shell spokeswoman Kelly op de Weegh. “It’s our strong view that residents closest to the resource should also have the opportunity to benefit.”

Arctic project carries Alaska-size challenges

Under the agreement, Shell would assign Arctic Inupiat Offshore an overriding royalty interest in oil and gas produced from some leases in the Chukchi Sea north of Alaska.

Under current law, the federal government would receive royalties from any oil and gas produced by those leases. But despite legislation in Congress that aims to change the money’s distribution, the royalty revenue otherwise would not have flowed to Alaska natives.

Arctic Inupiat Offshore also would have the option to participate in any future oil and gas development at the sites. Under the new agreement, the native company could acquire a working interest whenever Shell made a decision to proceed with development and production there.

Shell bored the first portion of two oil wells in the Chukchi and Beaufort seas in 2012, and is seeking permits that would allow the company to resume drilling them next year.

But even if the company found oil, any projects to bring that crude to market could be a decade or longer away.

Pete Slaiby, vice president of Shell Alaska, said the regional alliance gives the company a chance “to collaborate with savvy and experienced North Slope business partners” and demonstrates Shell’s commitment to ensure North Slope communities “directly benefit” from the work.

Sen. Lisa Murkowski, R-Alaska, said Shell had made “a wise decision.”

“This announcement ensures that the people of the North Slope Borough share directly in the oil and gas bounty off of their coast,” she said in a statement. “It also gives locals a say in what happens near their communities.”

Source: fuelfix.com

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