Alberta aboriginals and Shell team up
For Petroleum News
From a whirlwind of events in the Alberta oil sands there was a ground-breaking deal between Shell Canada and a northern Alberta aboriginal community to jointly develop leases.
The pact significantly advances plans by the Fort McKay First Nation to enter the commercial oil sands world in a way that could spell untold riches for its 500 residents.
A complex exchange of options and a possible land swap culminates a decade of talks involving 8,200 acres and a possible 500 million barrels of recoverable bitumen worth US$35 billion at today’s prices.
The Fort McKay Group of Companies, which is already a major supplier of services in the oil sands region valued at about C$100 million a year, is now planning to add a private company to the stable.
Fort McKay Chief Jim Boucher said that depending on how much of the project his community is prepared to shoulder, the company could be delivering production to Shell Canada’s nearby Athabasca project by 2012 or possibly earlier.
Those volumes would become part of Shell’s long-range objective of raising Athabasca output from 155,000 barrels per day to 500,000 bpd.
The transaction involves Shell’s Lease 90, which the company obtained rights to from the Alberta government before title was transferred to the first nation as part of a comprehensive land claim settlement with the Canadian government.
Fort McKay has the option of acquiring Lease 90 at a pre-determined price per hectare, in return for which Shell, under a lease swap arrangement, has the right to lease other adjacent Fort McKay lands.
Preliminary engineering work planned
The partners have agreed to conduct preliminary engineering work through SNC Lavalin to determine the extent of Fort McKay participation once the scope of a commercial venture has been determined.
Boucher said his community is conscious of the impact development could have on Fort McKay’s land and its traditional way of life, but the deal also gives the residents an opportunity to “participate fully and build a long-term economic vision.”
He said an anti-fur lobby in the 1980s virtually wiped out the economic viability of aboriginal communities in the region and most are still having difficulty finding alternative sources of income.
Breaking into the oil sands sector will give Fort McKay a chance to control its economic destiny, Boucher said.
He said that if there were no integration of Fort McKay leases with Shell Canada’s operation, the first nation would still have an opportunity to develop expertise that could eventually be applied to the leases.
It could also let Shell Canada take full charge of the development and pay Fort McKay royalties.
Shell Canada Chief Executive Officer Clive Mather said that although there is more work to be done, the agreement “has the potential to return real value to both Shell and Fort McKay for many years to come.”