Shell expands Arctic exploration plans

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

Shell gets conditional OK for Beaufort exploratory drilling

I am sorry, but Hornorkesteret and Anchorage Daily News do not see eye to eye on this one. See also earlier post about “unconventional ‘tight’ shales, sands, carbonates and hydrocarbon ‘source’ rocks.”
Anchorage Daily News: Our view: Good call
Original article here

Shell Alaska’s plans to drill an exploratory well just offshore in the Beaufort Sea this summer is a go — pending another safety review by federal regulators.

Interior Secretary Ken Salazar said offshore Arctic exploration would proceed “with utmost caution.” Close scrutiny of Shell’s plans and performance should be no damper on 2011 exploration plans.

Shell scaled back its original 2011 program, leaving disputed Chukchi Sea development to be resolved in court to focus on the Beaufort project. The more modest enterprise will give the company, regulators and North Slope leaders a chance to narrow their focus and make sure everything is done right.

While it’s still a little tentative, the Obama administration’s endorsement reflects the decision it made about Alaska development before the Deepwater Horizon disaster in April. That decision was to nix exploration near the rich salmon fishery of Bristol Bay, but to explore and develop with care in the Arctic.

That made sense then and still does.

Rear Adm. Christopher Clovis, commander of the Coast Guard in Alaska, said last month that he has confidence in Shell’s exploration plans for 2011. He said actual production — which is the goal of exploration, after all — presents more problems. But there’s time to address those.

Let Shell go to work in 2011 to explore for oil — and also restore faith in the industry’s ability and will to do it right, to tap Alaska’s oil and gas treasure while abiding by the highest and environmental and safety standards on the planet.

That’s the challenge. We need the oil. We need the jobs. And we need to provide them while protecting the Arctic environment and its communities.

BOTTOM LINE: Feds’ conditional blessing of Shell’s Beaufort exploration is good news.

Chevron wins $103M bid for Arctic rights

Chevron Corp has acquired an exploration license for the Beaufort Sea in Canada’s Far North with a C$103.3 million bid as the country gets set to review offshore drilling following the BP oil spill in the Gulf of Mexico. Indian and Northern Affairs Canada, which is responsible for oil and gas activity in the Arctic, awarded Chevron a 205,946 hectare (508,800 acre) block north of the Yukon coast and just east of the Canada-U.S. boundary. The acreage was up for grabs as part of a 2009-10 call for bids and follows Chevron’s last winning Beaufort acreage bid, a C$1 million package in 2007. The company has yet to devise seismic and drilling plans for the new block, Chevron Canada Vice-President David MacInnis said. The plans will require approval by Canada’s National Energy Board. Chevron already had interests in 10 Beaufort discoveries, including 33 percent of the 1986 Amauligak find and 13 percent of the adjacent Issungak discovery. Its latest acquisition comes after a nearly C$600 million acquisition of Beaufort Sea exploration rights in 2007 by Imperial Oil Ltd and Exxon Mobil Corp and a C$1.2 billion winning bid for acreage by BP Plc the following year. Last month, the three formed a joint venture to explore on their parcels to avoid duplication of equipment and personnel in the remote, icy region. MacInnis said Chevron was not part of that tie-up, but was open to looking for opportunities to work with other players in the industry. Imperial said last week that the partners will not start exploratory work until after the NEB completes its review of offshore safety and environmental impact. The regulator announced the review in response to heightened government and public concern after the U.S. Gulf spill. Chevron will participate in the proceedings, MacInnis said. “We’re looking forward to the review and putting forward some ideas as to how to improve performance and especially address questions that are coming up on oil spill prevention and containment,” he said. When the NEB announced the review in May, it canceled a planned hearing on a request from BP and Exxon to reexamine a requirement that Arctic drillers need to drill a relief well in the same season that an exploratory well is completed. There is no date yet for when the review is to begin. Chevron is operating Canada’s only current offshore drilling project, the deep water Lona 0-55 well in the Orphan Basin off the coast of Newfoundland. It is expected to reach its target depth next month. Chevron shares were down $1.04, or 1.3 percent, at $78.03 on the New York Stock Exchange.

Original article here

Citing gulf oil spill, Obama to suspend Arctic drilling

Anchorage Daily News
WASHINGTON — The Obama administration Thursday will suspend planned exploratory oil drilling in the Arctic Ocean off Alaska until at least 2011, a casualty of the Gulf of Mexico oil spill.

The suspension will be part of a report that Interior Secretary Ken Salazar will give to President Barack Obama, who’s likely to address the suspension as well as other proposals stemming from Salazar’s report, at a White House news conference Thursday.

The move will stop Shell from drilling five wells in the Chukchi and Beaufort seas off northern Alaska weeks before it had hoped to start work, an administration official told McClatchy Newspapers.

The move will stop for now a controversial expansion of oil drilling in a part of the world that could hold vast stores of oil and natural gas, but which environmentalists warn would come at great risk.

Despite a late appeal from Shell that it would employ new safety measures in the wake of the Gulf spill, Salazar was unconvinced that the exploratory drilling even in the much shallower waters of the Arctic would be safe.

“He is suspending proposed exploratory drilling in the Arctic,” an administration official said on condition of anonymity to talk before Salazar’s report is officially released Thursday. “He will not consider applications for permits to drill in the Arctic until 2011 because of the need for further information-gathering, evaluation of proposed drilling technology, and evaluation of oil-spill response capabilities for Arctic waters.”

Shell, which paid $2.1 billion in 2008 for the leases, had planned to start exploratory drilling in June or July. The decision was met with a statement of deep unhappiness by U.S. Sen. Mark Begich. “I am frustrated that this decision by the Obama administration to halt offshore development for a year will cause more delays and higher costs for domestic oil and gas production to meet the nation’s energy needs,” Begich said Wednesday night in a prepared statement. “The Gulf of Mexico tragedy has highlighted the need for much stronger oversight and accountability of oil companies working offshore, but Shell has updated its plans at the administration’s request and made significant investments to address the concerns raised by the Gulf spill.”

Begich said he would work with fellow Alaska Sen. Lisa Murkowski, a Republican, the Interior Department and Alaska drillers to ensure operations would resume next year. A spokesman for Shell said the company would issue a media response Thursday. A spokesman for Murkowski said she would also respond Thursday. The federal Minerals Management Service estimates that the two Arctic seas hold up to 19 billion barrels of oil and up to 74 trillion cubic feet of natural gas, a combined resource comparable to the onshore fields of Alaska’s North Slope.

In a post-Gulf spill pitch to keep its work on track, Shell stressed that the Arctic seas are shallower than the Gulf, that drilling wouldn’t have to probe as far into the earth, and that the equipment wouldn’t be under as much pressure — at least for the first years of exploration. Intense pressures in the deep Gulf of Mexico hole contributed to the Deepwater Horizon blowout and subsequent fire and oil spill. In the Chukchi Sea, Shell said, it would be drilling in 150 feet of water to a depth of 7,000 to 8,000 feet. In the Beaufort, which is also 150 feet deep, it would be drilling to a depth of 10,200 feet.

The Deepwater Horizon rig in the gulf was working through 5,000 feet of water, and then drilling to a depth of 18,000 feet. On May 14, Shell sent a five-page letter to the Minerals Management Service spelling out how it plans to drill in Arctic waters, how it would prevent a spill, and how it would respond starting within an hour if a spill occurred. “Shell is committed to undertaking a safe and environmentally responsible exploration program in the Chukchi Sea and Beaufort Sea in 2010,” Shell Oil Co. President Marvin E. Odum told the MMS. “I am confident that we are ready to conduct the 2010 Arctic exploratory program safely and, I want to be clear, the accountability for this program rests with Shell.”

Those plans included nine new steps the oil giant has added since the Gulf of Mexico spill, including a policy of testing underwater equipment called a blowout preventer every seven days instead of every 14 days and development of a system to allow a remote-operated vehicle to turn the blowout preventer back on.

“Shell will be ready to respond with oil spill response assets in one hour,” Odum told federal regulators, pointing to a three-tier system including an onsite spill team, nearby barges and response vessels and onshore response teams. He also argued that the brutal weather of the Arctic makes it easier to clean up an oil spill, not more difficult. “Arctic conditions create differences in responding to oil in cold and ice conditions,” he said. “Differences in evaporation rates, viscosity and weathering provide greater opportunities to recover oil.”

He said a 2009 project proved that “in Arctic conditions, ice can aid oil spill response by slowing oil weathering, dampening waves, preventing oil from spreading over large distances, and allowing more time to respond.”

Environmentalists countered that the harsh environment and the remoteness of the area would make any spill harder to handle, not easier. “Hazards present in the Arctic can include frigid temperatures, presence of sea ice, gale-force winds, intense storms and heavy fog,” said Chuck Clusen, the director of the Alaska project at the Natural Resources Defense Council. “To date, no technology exists to clean up oil in sea ice conditions. Further, the cold water breaks down oil much slower than the warm Gulf waters. … The potential for loss in the Arctic is great.”

Administration officials noted that Salazar already had been pulling back from offshore drilling in Alaska even before the Gulf spill raised new questions about safety within the industry as well as regulation and oversight from MMS, which resides within his department.

In March, they said, Salazar canceled four remaining lease sales that had been scheduled for the Chukchi and Beaufort seas. Also in March, Obama put Bristol Bay, one of Alaska’s premier salmon grounds, off limits to oil and gas exploration through 2017.

Anchorage Daily News reporter Richard Mauer and McClatchy correspondent Erika Bolstad contributed to this article.

Original article here