Shell expands Arctic exploration plans

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By Tim Bradner
Alaska Journal of Commerce – original article here

Shell now has a more expansive exploration strategy for the Beaufort and Chukchi seas than what the company had previously planned.

The company intended to file plans of exploration in early May with the Bureau of Ocean Energy Management, Regulation and Enforcement, or BOEMRE, for up to 10 exploration wells in the Beaufort and Chukchi seas in 2012 and 2013, a Shell spokesman said.

Two drillships would be used.

Previously Shell planned to use one drillship in 2012 in the Beaufort, with an expectation of drilling one to two wells.

“We believe the conversations we are having with regulators and government officials are more positive in view of the safeguards we have put in place, even prior to Macondo,” said Pete Slaiby, Shell’s Alaska vice president. “As a result, we are cautiously optimistic we will be allowed to pursue a multi-well drilling program in 2012 as we have always planned.”

Not all of the wells outlined in the new exploration plans will actually be drilled, company spokesman Curtis Smith said.

“We file for permits for more wells than will actually be drilled so there is flexibility in changing locations depending on new geologic information or ice conditions,” he said.

Smith said the plan is now to use two drillships, with a goal of drilling two wells per year in the Beaufort Sea and three wells per year in the Chukchi Sea, he said.

Each drilling vessel would provide backup for the other in drilling a relief well in the event of a blowout, Smith said.

In the Arctic, offshore drilling must be done during the summer when the ice recedes, creating open water. The exception to this is with wells in near-shore coastal waters, where the depth is shallow enough to build an artificial gravel island.

In the 1980s, drillship were used in several exploration wells farther from shore in the Beaufort Sea, and there also were offshore exploration wells drilled in the Chukchi Sea, including many by Shell in the early 1990s.

No commercial discoveries were made in the 1980s and 1990s, but oil and gas was found in both the Beaufort and Chukchi at locations that are now the prime targets for Shell’s renewed exploration.

The drillships planned for Shell’s 2012 and 2013 work are the Noble Discoverer, which is now under contract to Shell for Arctic exploration but is now being used elsewhere, and the Kulluk, a drilling vessel built for the Arctic that Shell owns.

The Kulluk is now in Dutch Harbor, where it is undergoing modification, Smith said.

The new more aggressive plan represents a change in Shell’s strategy. The company previously planned to drill one to two wells in the Beaufort Sea, with one drillship, in 2012.

Shell will have to file new applications for air quality permits for each ship and for each area of drilling.

An air quality permit for Shell’s existing plan of drilling one well in the Beaufort Sea with a single drillship, previously planned for 2011 or 2012, is still pending with the U.S. Environmental Protection Agency’s Region 10 office in Seattle.

EPA had previously issued the permit but it was appealed by environmental groups to EPA’s internal Environmental Appeals Board. The appeals board kicked the permit back to Region 10 last January with a request for modifications.

The Region 10 office has yet to resubmit the modified air permit back to the appeals board.

Smith could not comment on the status of the permit but said Shell “is having good conversations with EPA and we’re optimistic.”

The air quality permits are similar for both the Beaufort and Chukchi, Smith said. The effort to resolve issued with the initial permit should make it easier with permits that follow.

Shell holds 137 federal OCS leases in the Beaufort Sea and 275 leases in the Chukchi Sea. The company has spent over $3 billion so far in its efforts to secure leases, do environmental work and secure permits for exploring the leases. About $2.2 billion of that was spent in bonus bids paid to the federal government for the Chukchi Sea leases.

Tim Bradner can be reached at

tim.bradner@alaskajournal.com.

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