Shell's return: Shell Oil was a familiar presence in the Alaska oil industry through the latter part of the last century. The co

Though the oil industry was shocked this summer with the announcement by British Petroleum that it would shut down half of its Prudhoe Bay crude oil production to remedy corroded pipelines, a top Shell Oil executive says the situation is not systemic and does not warrant a revisit of U.S. pipeline regulations.

"The regulations are appropriate," Shell Oil Co. President John Hofmeister told an infrastructure security conference in Washington in August, as quoted by DowJones Market Watch. "The judgment of the methodology and technology relied upon was not sufficient, but I don't think it warrants a complete review of regulatory authority. We have a robust system."

Though the debate involving ongoing scrutiny of the Prudhoe Bay situation has drawn comment from dozens of high-profile authorities worldwide, the words from Hofmeister are particularly of interest to Alaskans as the oil giant reestablishes its footprint in the 49th state.

FAMILIAR GROUND

Shell Oil was a familiar presence in the Alaska oil industry through the latter part of the last century, as one of the state's pioneer explorers and a producer/operator in Cook Inlet. The company left the state in 1998, but returned again with renewed interest following a successful series of bids for 80-plus leases in the U.S. Minerals Management Service's (MMS) March 2005 Outer Continental Shelf Lease Sale 195. The company's interest in the sale totaled more than $44.4 million, according to the Petroleum News, an industry publication. The sale itself attracted a total of 121 bids valued at more than $46 million and concerned a vast area that stretched 9.4 million acres offshore of Alaska from the Canadian border to Barrow, according to the state.

WARM RETURNS

For many, the news of Shell's return to Alaska was not a surprise. Prior to the sale, Matthias Bichsel, the company's global exploration director, had told industry publication Oil Daily that Alaska was considered by the company as among the global geographic regions of key upstream potential.

And the state itself greeted the company back with open arms.

"I want to publicly welcome Shell back to Alaska," Gov. Frank Murkowski said in March of last year, applauding the MMS sale results. "This sale again demonstrates Alaska's competitiveness. We are working hard at the state level to ensure that Alaska is no longer an afterthought in the minds of the oil industry. With numerous oil prospects and the gas line on the horizon, Alaska can continue to contribute to the nation's energy supply for decades in the future."

The March 2005 sale, which included areas offshore of the hotly debated Arctic National Wildlife Refuge (ANWR), garnered strong public interest largely due to its proximity to the refuge. The governor saw the situation as a positive. "I was particularly pleased to see the heavy emphasis Shell has placed on tracts directly adjacent to ANWR," Murkowski said. "This is a strong indication of industry interest in the 1002 area."

A year-and-half later, such interest and scrutiny continues on a national front as the country continues to debate the future of its Alaska oil and gas holdings in light of increased concern for environmental protections of the nation's natural resources.

On the second stop of a 50-city tour in August, Hofmeister told the Orlando (Fla.) Regional Chamber of Commerce that the United States should develop a "culture of conservation," while also providing access to the reserves of oil and natural gas in the Gulf of Mexico and Alaska, among other locations, according to the Orlando Herald Tribune. The concept of increased access to hitherto protected oil and gas reserves is largely criticized by those opposed to opening the nation's protected resources, with the debate gaining increased fervor as oil prices rise and events such as the Prudhoe Bay BP shutdown make headlines.

NORTH TO THE FUTURE

With expansive business and exploratory interests worldwide, Shell Oil's return to Alaska has nonetheless been high-profile both within and outside of the state, hinging strongly on the company's envisioned potential and opportunity here, according to published interviews and industry news reports.

"Shell is committed to growing globally through exploration for new material oil and more integrated gas and we believe North America continues to hold promising opportunities. Alaska, because of its large resource potential, is one such area," said Annell Bay, regional vice president for Exploration in the Americas, in a release at the time of the successful series of bids. "We see the Beaufort Sea as a significant basin. It offers a wide diversity of geology and is largely untested."

In turn, the company's history in Alaska made for a more comfortable reentry, according to company sources.

"Based on our geological analysis and our experience with offshore developments in Arctic conditions, plus our history of safe and successful exploration in Alaska, we believe that we can build a significant position in Alaska, starting in the Beaufort Sea. We also plan to make additional investments in Alaska," said Chandler Wilhelm, Alaska exploration manager. "For Shell to be successful, and to achieve our vision for Alaska, we need to work in partnership with key stakeholders for our mutual benefit. We are committed to doing our part."

That "part" includes an increased profile in the state's business community, with a presence in local events like the 2006 Kenai Peninsula Arctic Winter Games, for which the company donated $50,000.

To accommodate its renewed interest in Alaska, Shell Oil opened an Anchorage office in the Frontier Building, 3601 C. Street, and this year named three key people in leadership roles: 30-year Shell employee Rick Fox as Alaska asset manager; Cam Toohey, former special assistant to the secretary of the Department of Interior and a lifelong Alaskan, as Alaska government and external affairs manager; and lifelong Alaskan and former North Slope Borough Mayor George Ahmaogak Sr. as Alaska community affairs manager.

"Shell's ambition is to be in Alaska for a long time, starting in the Beaufort Sea," said Alaska Exploration Manager Chandler Wilhelm in a company release. "Though production operations are still years away, we are actively working with stakeholders. Rick, Cam and George will help us strengthen the business planning and stakeholder engagement work already under way."

That Alaska's resources are under a lens of scrutiny by various cultural and interest groups is not lost on the company. "In Alaska, we know stakeholders have a number of concerns related to our industry, including potential impacts to subsistence living and Native communities, protecting an area rich in biodiversity and preventing oil spills in an Arctic environment," said Ben Dillon, regional government and external affairs manager for Shell Exploration & Production Co. in the Americas, in a press release. "Shell is committed to listening to local people and getting the best cultural and environmental information and input. In order to have a successful project for all involved, Rick, Cam and George will position Shell to best address the concerns of the people and representatives who live and work in these communities."

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