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NEWS BULLETIN

February 15, 2008 --- Vol. 14, No. 19February 2008

Shell, Beaufort drilling and Pioneer, Cosmopolitan well news

Dear Subscribers,

Below is the Petroleum News' news bulletin that went out yesterday.

It contains breaking news about Shell and Pioneer in Alaska. The Shell news will be in Sunday's Petroleum News, which will be available online today, but the Pioneer news won't be in Petroleum News for another week.

If you are interested in receiving the news bulletins, please let me know and I will send you details on how to become a subscriber. I can be contacted by phone at 907 522-9469 or email at [email protected] .

Thank you,

Clint Lasley, circulation director

February 14, 2008 --- Vol. 14, No. 19 February 2008

Shell says no to Beaufort oil drilling in 2008

Even if the U.S. Court of Appeals gives Shell approval to drill oil exploration wells in Alaska’s Beaufort Sea this year, the company has decided not to do any "critical" drilling in 2008, Shell’s Alaska operations manager Susan Moore said Feb. 14.

The company’s spokesman in Alaska, Curtis Smith, told Petroleum News that Shell’s decision was based on “the availability of drilling assets” combined with a response to “repeated requests that we take a measured approach to exploring the Alaska offshore.”

However, the company does plan to drill some shallow wells, termed “top-hole wells,” that would not go deep enough to penetrate hydrocarbon reservoirs. Shell has been discussing its plans with regulators, Moore said.

“Basically it’s preparatory work that would take place at the Sivulliq prospect,” Smith said, referring to the prospect that used to be called Hammerhead and which lies offshore the North Slope, due north of Flaxman Island on the western side of Camden Bay.

“Top-hole wells typically extend (to depths of) 1,000 to 1,200 feet and provide structural support for the well as it grows in depth,” Smith said.

Essentially, a top-hole well is a mudline well cellar with a 30-inch and 20-inch casing string that establishes the well structure, isolates the permafrost and provides the well with structural integrity, Smith said.

Shell wants to use its Kulluk floating drilling platform to drill three of these wells at Sivulliq. But the Frontier Discoverer, the drillship that Shell had also contracted for Beaufort Sea drilling, will remain in Australia during 2008, he said.

Drilling top-hole wells “will give us a head start on our 2009 season, which we hope will be quite robust,” Smith said.

To drill the top-hole wells Shell will need permission of the U.S. Court of Appeals for the 9th Circuit because the company’s Beaufort operations remain on hold, pending the outcome of an appeal by the North Slope Borough, the Alaska Eskimo Whaling Commission and several environmental organizations against U.S. Minerals Management Service approval of Shell’s exploration plan. That appeal has resulted in a court injunction on Shell’s Beaufort drilling activities until the case is settled. The court heard oral arguments in the case in December but it is not clear when it will make a ruling.

“If we get the go-ahead from court and the permits we need, taking a more measured approach will help instill confidence with the stakeholders — demonstrate that we can operate safely and responsibly,” Smith said. “We’ll also get a chance to show off some of our technology.”

Cosmo well tests encouraging, line to KKPL planned

Pioneer Natural Resource’s Hansen 1A-L1 sidetrack appraisal well in the Cosmopolitan prospect off Anchor Point on Alaska’s southern Kenai Peninsula has produced oil at 400 to 500 barrels per day from the Starichkof zone, Pioneer spokesman Tadd Owens told Petroleum News today.

“The well tests were encouraging and we now have several months of data analysis to complete before we can prepare a detailed plan forward,” Owens said. “We are expecting to commence permitting activities this year as well as work on facility design. Our next well is likely to be drilled in 2009.”

The gas to oil ratio is very low in Cosmopolitan, Owens said, but based on the well tests, Pioneer plans to build a 16-mile gas pipeline to connect Cosmopolitan north to the Kenai Kachemak pipeline at Ninilchik, he said.

Pioneer spud the well using Rowan Rig 68 in September and completed the drilling in November, to test a known oil accumulation originally discovered in 1967. The company is determining whether production from Cosmopolitan would be viable - Owens said that a decision regarding whether to develop Cosmopolitan would likely follow drilling of the next well in 2009.

Editor’s note: For the full story see the Feb. 24 edition of Petroleum News.

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