Slaiby says open OCS discussion needed
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Warns of possibility of walking OCS development into another ANWR-style standoff if people continue with business as usual
Alan Bailey Petroleum News
Another potential summer drilling season on the Arctic Alaska outer continental shelf has come and gone without the sight of a drillship on any of Shell’s Beaufort and Chukchi sea oil and gas leases. And after about $3.75 billion dollars in expenditure for lease acquisition, seismic surveying, environmental monitoring and the establishment of spill response capabilities, the company has yet to see a drill bit grind its way into any of its offshore prospects.
Time for openness It’s time for everyone — including oil companies and the environmental organizations — to be willing to openly discuss all aspects of offshore development, Pete Slaiby, Shell’s Alaska vice president, told the Resource Development Council’s annual conference on Nov. 17.
“Unless we’re willing to open up and really have these discussions, are we walking the OCS into another ANWR?” Slaiby asked.
Slaiby said that a well known environmentalist had recently told him that environmental organizations see opposition to government regulators as their essential role, even although this particular environmentalist did not especially take issue with Shell’s Alaska plans. At the same time the environmentalist bemoaned the lack of progress in developing a national energy policy, dealing with greenhouse gases and addressing the issue of ocean acidification, Slaiby said.
No one can afford to continue with business as usual, Slaiby said.
“If oil companies continue to keep what they’re doing behind closed doors, if we’re not willing to talk about the longer-term, the real value propositions for the communities we work in, if environmental groups continue as a matter of course to oppose development at every turn, we’re surely never going to get anywhere,” he said.
Offshore oil and gas development worries people and it is important to take the time to address people’s concerns.
“We have to sit down with the stakeholders and look at this in the longer term,” Slaiby said.
Events of 2010 Slaiby recounted events earlier this year, with the situation appearing promising for Shell’s Alaska venture until BP’s Macondo well started spewing oil into the Gulf of Mexico, bringing outer continental shelf drilling to a sudden halt.
At the end of March, before the Gulf blowout erupted, President Obama announced that existing leases in the Beaufort and Chukchi seas would remain in place; Interior Secretary Ken Salazar indicated that he was going to submit final documentation to the District of Colombia Court of Appeals, to resolve litigation over the lease sale program that included the 2008 Chukchi Sea lease sale; and Shell prevailed in 9th Circuit Court of Appeals litigation over the company’s Chukchi and Beaufort Sea exploration plans, Slaiby said.
“On March 31 … in Shell we were never really closer to what we were trying to do for the last five years,” Slaiby said.
Shell started mobilizing its Arctic drilling fleet, an operation that involved moving vessels from places as far away as China, New York and Norway, he said.
Then, towards the end of May, as oil continued to gush into the Gulf of Mexico, the Department of the Interior notified Shell that the company would not be allowed to drill in the Arctic OCS in 2010, thus nixing the company’s drilling plans until the 2011 open water season, at the earliest.
But the U.S. Minerals Management Service, the precursor agency to what is now the Bureau of Ocean Energy Management, Regulation and Enforcement, complied with both the Outer Continental Shelf Lands and the National Environmental Policy Act when permitting Shell’s Alaska program, Slaiby said.
“It was a very, very rigorous process that went from top to bottom in looking at these wells,” he said.
Simple wells Shell drills about 100 exploration wells each year and the company’s planned Chukchi and Beaufort sea wells are the simplest types of well in the company’s portfolio, Slaiby said. Water depths of around 130 feet at the site where Shell had hoped to drill in 2010 compare with the 5,000-foot water depth of the Macondo well. And with lower reservoir pressures than in the deepwater Gulf of Mexico, it would take multiple out-of-control wells in the Alaska OCS to spill oil at the same rate as happened after the Gulf blowout, Slaiby said.
However, with the Department of the Interior not yet having made a decision on whether to re-open Arctic OCS drilling, the status of oil and gas exploration in Alaska remains uncertain — Shell has tried to start breaking the logjam by submitting to BOEMRE an application to drill in 2011 in the company’s Beaufort Sea Sivulliq prospect, Slaiby said.
“It’s a carbon copy of the plan that we produced last year and the one that passed the test of the 9th Circuit court,” he said.
And for its planned 2011 drilling Shell is building a containment dome that could be placed over a leaking well in the unlikely event of a well blowout. In addition, the company has mobilized its Kulluk floating drilling platform to act as a backup relief well rig.
In 2012 the company will put the Kulluk to work as a second drilling rig in the Beaufort Sea, Slaiby said.
Environmental studies Meantime Shell, in conjunction with ConocoPhillips and Statoil, has been continuing to work on baseline environmental science, using a multidisciplinary approach to take account of every aspect of the Arctic offshore environment, Slaiby said.
“Clearly moving forward (with exploration and development) will mean that there has to be a level of assurance about how the programs will play out from an environmental standpoint,” he said.
With around $500,000 spent so far by various organizations on about 5,000 environmental studies, much is already known about the Chukchi and Beaufort seas, Slaiby said. However, more studies will be needed before moving from exploration drilling into a field development scenario, he said.
And Slaiby said that Shell is particularly proud of its cooperative relationship with the Barrow Arctic Science Consortium. The company has also formed an agreement with the North Slope Borough on a program of science research to address the concerns of users of subsistence resources.
“It’s really an opportunity for those stakeholders, those residents, to tell us what’s important to study for them,” Slaiby said.
North Slope Borough Mayor Edward Itta has lifted the bar when it comes to offshore development, he said.
“He’s really asked some tough questions and he’s really trying to move these communities to a place where they can be comfortable with it as well,” Slaiby said. “We just have to be open for the change.”
Publicity in Washington
Back in Washington, D.C., Shell has launched a publicity campaign to inform people there about the company’s Alaska program, with an emphasis on the economics of Arctic development and on the company’s oil spill response plans. The campaign is also reminding people that Shell has been conducting scientific research into the environment in which the company plans to drill, and that there is some urgency in the need to move forward, Slaiby said.
A decision on the future of offshore exploration and development in the Arctic has yet to be made in Washington, he said.
“Once a decision is made it becomes very, very difficult to walk that decision back,” Slaiby said.
With support from the Alaska congressional delegation and the state governor, “we have, I think some real wind in our sails now,” he said. But critical decisions lie ahead on Shell’s Alaska offshore drilling.
“We need clarity on 2011 because we really can no longer afford to wait for a prolonged decision before we move forward,” Slaiby said. “The cost of keeping this opportunity open simply becomes too prohibitive.”
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