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Providing coverage of Alaska and northern Canada's oil and gas industry
February 2007

Vol. 12, No. 8 Week of February 25, 2007

Shell building legacy

Alaska 2007 program takes shape; environment, communities high priorities

Alan Bailey

Petroleum News

A flurry of government regulatory filings and announcements in February provides the most visible sign that the clock is ticking towards 2007 field activity in Shell’s exploration program for offshore northern Alaska. And on Feb. 21 Petroleum News asked Rick Fox, Shell’s asset manager for Alaska, about the company’s exploration plans and its vision for its Alaska operations.

“Our company has a proud legacy here,” Fox said, referring to Shell’s history of exploration in the state. Shell left Alaska in 1998 after more than 40 years of activity in the state that included exploration in the Beaufort Sea, the Chukchi Sea, the Bering Sea, and the discovery of the Beaufort Sea’s Northstar and Liberty fields.

“We drilled four out of the five wells that have been drilled in the Chukchi and participated in most of the wells that were drilled in the offshore Beaufort,” Fox said.

Fox himself was involved in Shell exploration activities in the Bering, Beaufort and Chukchi seas in the 1980s.

Now, high oil prices and the availability of new oil and gas technologies have attracted Shell back to the Alaska offshore regions, Fox said.

Two fronts

Fox characterized Shell’s current Alaska initiatives as pursuing two fronts — investigations that focus on finding new prospects, including the preparations for future lease sales, and work associated with known prospects. Work on the first of those fronts involves the acquisition of 3-D seismic data, while work on the second front primarily involves exploration drilling and drilling preparations.

Shell hopes to acquire 3-D seismic from both the Chukchi and Beaufort Seas in 2007, depending on sea ice conditions, Fox said. And, according to Shell’s Alaska Coastal Management Program filing WesternGeco’s M.V. Gilavar will conduct the seismic surveys, probably between early August and late October. In the summer of 2006 the same vessel acquired some Chukchi seismic for Shell, but the vessel could not operate in the Beaufort Sea in that year because of severe ice conditions.

As with last year, the Chukchi surveys will take place 55 to 60 miles, or more, offshore, Fox said. Shell will work with the Alaska Eskimo Whaling Commission to adaptively adjust the seismic program, rather than applying an over prescriptive set of operational rules. That presents the best way to minimize any impact on subsistence hunting, Fox said.

“We will work with them adaptively to fit our seismic program into a schedule that does not affect the hunt,” Fox said.

And Fox commented that the 2006 Chukchi seismic program had not impacted the hunt, although three different companies were all acquiring seismic.

“When we went back for the post-season reviews, the villagers on the Chukchi Sea declined … because they saw no impact,” Fox said.

Shell is also conducting a research program to test the feasibility of acquiring seismic data from winter sea ice rather than during the summer open water season (see the Jan. 21 edition of Petroleum News).

Drilling at Sivulliq

On the other exploration front, the investigation of known prospects, Shell is focusing initially on the area of the Sivulliq prospect. Formerly known as Hammerhead, Sivulliq lies due north of Flaxman Island on the western side of Camden Bay. The prospect contains a known oil pool penetrated by two exploration wells drilled by Unocal in 1985 and 1986. According to information published by MMS the prospect is estimated to contain 100 million to 200 million barrels of technically recoverable oil in a Brookian sand reservoir. But the oil pool has not been fully delineated.

Interestingly, Shell participated in the original Hammerhead drilling and Fox was himself onboard the drill ship that tested the Hammerhead oil discovery.

Shell’s current plan involves the use of modern technology to appraise the known oil accumulation.

“You want to verify with today’s technology what’s there,” Fox said. “You want to hinge your future on some strong possibilities early on.”

Shell expects to drill three wells at Sivulliq during the 2007 open water season, as part of a program that anticipates the drilling of three to four wells per year during the period of the company’s 2007 to 2009 eastern Beaufort Sea exploration plan.

And the drilling plans include one deep target with a well depth approaching 14,000 feet, although the majority of currently planned wells will likely drill to depths of less than 8,000 feet, Fox said.

But Shell’s choice of specific wells to drill after 2007 will depend on the results of the 2007 work.

“What we do after year one depends a lot more on (what happens in) year one than anything else,” Fox said.

However, the need for a large petroleum find to justify the huge cost of arctic offshore petroleum exploration and development attests to Shell’s confidence in the region.

“Frankly if we didn’t believe there was a possibility of that (significant find) we wouldn’t be in with this big investment,” Fox said.

Two drilling vessels

Shell will be using two drilling vessels, the Kulluk and the Frontier Discoverer, for the Beaufort Sea drilling program.

The Kulluk was originally designed to operate specifically in Beaufort Sea ice conditions, Fox said. And Shell has had the Discoverer completely refurbished for the Beaufort Sea operations, he said. One important feature of the Discoverer is an anchor system that allows the vessel to weathervane around its center, without the need to move anchors, Fox said.

The use of two drilling vessels will enable Shell to obtain early evaluations of oil and gas prospects and will also enable one vessel to back up the other.

Fox pointed out that it is essential to use mobile drilling platforms in the water depths of more that 100 feet where Shell will be operating and that Shell has a protocol for removing the rigs from the drilling area in severe ice conditions.

A fleet of ice-rated vessels will support the drilling operations. But, because of the lack of an icebreaker fleet in the United States or Canada, the vessels are coming from several countries, including Russia and Finland. For example, the icebreaker Vladimir Ignatyuk will come from Russia.

Shell has commissioned and equipped a brand new U.S. 301-foot, ice-rated, anchor handling supply vessel as an oil spill response vessel. And the company is bringing on site a complete suite of offshore oil spill response equipment — ASRC RTS will manage the offshore oil spill response arrangements and has prepared Shell’s oil discharge prevention and contingency plan. Alaska Clean Seas will provide nearshore oil spill response support.

Although he hopes that an oil spill will never happen, Fox is confident that the technology and equipment that Shell has available will enable an effective cleanup in the event of any size of spill. If there were a spill “we’ll be there until it’s cleaned,” he said.

In parallel with the drilling activities, Shell is continuing with some other Beaufort Sea investigations that it started in 2006. An approximately 12-day program of geotechnical borings will determine the properties of the top 400 feet of soil under the sea floor. This scientific investigation forms an essential precursor to any petroleum development evaluation — preliminary engineering design and cost estimates for any development depend on data about the subsea soil.

And sea bottom surveys at potential future drilling sites will involve the use of a type of low-power seismic system that can identify drilling hazards such as shipwrecks or shallow gas pockets.

“We proactively work ahead of time on potential sites and go get those surveys,” Fox said.

Wildlife monitoring

During the 2007 open water season Shell will be mounting a major program to monitor marine mammals and mitigate any impacts of the industrial activities. Of particular concern is the potential for impacts on the migration routes of bowhead whales and the consequent impact on subsistence hunting.

“We have worked this with the Alaska Eskimo Whaling Commission and the North Slope Borough wildlife department,” Fox said. “From all our conversations they are both very pleased with Shell’s comprehensive approach to gathering data on the actual routes that the whales take.”

Marine mammal observers recruited on the North Slope will be stationed on every Shell vessel, watching for wildlife 24 hours per day, seven days per week. Shell has hired about 70 observers, Fox said.

Shell will deploy five passive acoustic arrays out in the Beaufort Sea, at intervals along the coast from near Point Barrow in the west to the Kaktovik in the east. Each array will extend about 20 miles out into the sea. The arrays will enable the continuous monitoring of whale movements during the open water season, by tracking whale sounds.

Aerial monitoring flights will patrol out from the coastline twice a day during daylight hours. Shell also plans to test the use of unmanned aerial vehicles for wildlife monitoring, although the company has not yet reached the point of replacing manned flights by unmanned flights.

“We are working on a program to do further testing this season,” Fox said. “We are very hopeful about that but we are not ready to replace the others yet.”

Shell has conducted some tests of wildlife spotting from drones in the Puget Sound, in the Pacific Northwest.

“There were a lot of things learned and it was a very encouraging result,” Fox said.

Community involvement

As in 2006, Shell is taking a lead in developing a single 2007 whaling conflict avoidance agreement that would apply to all offshore industrial activity, Fox said. In 2006, Shell contacted every possible offshore operator to ensure comprehensive involvement in the agreement.

“In return visits to the villages we got very positive remarks about the way we operated last year and we were invited to do it again,” Fox said.

And a key component in communication with village subsistence hunters will be a Shell-operated communications center in every village, fully manned by village residents. Protocols require every vessel to call the centers at least every six hours.

“The Alaska Eskimo Whaling Commission and Shell and various other parties during the season will be talking every day,” Fox said. “… We’re committed to good communications and constant dialogue with the people representing the whaling captains and with the agencies. … We’ll be adjusting and adapting all the time. … If communications are there you can work through a lot.”

Going beyond the subsistence hunting issue, Shell sees safety and the protection of the environment, coupled with community involvement, as critical components of its Alaska operations.

And community involvement goes way beyond having people say “okay” to what Shell is doing. It means having local people fully involved in Shell’s operations, Fox said. Fox described a vision of life in a village home in which “there will be someone sitting at the (dining) table who is involved in our business, telling the truth about what is happening and making their family proud of what they’re accomplishing.”

“We believe that’s essential,” Fox said.

Shell wants Alaska to become a heartland for its operations.

“At this point there’s a lot of road ahead for us. … We’re interested in the long term — long term exploration and development in Alaska. Everything we do is based on a belief that this will be a heartland for Shell,” Fox said. “… Trust is going to be the foundation from which we can build our heartland business in Alaska.”

And what are Fox’s feelings about his return to Alaska?

“I’ve always loved Alaska and I’m very happy to be back. Part of the reason I accepted this job is because I believe it’s a special place,” Fox said.





MMS approves Shell’s exploration plan

The regulatory process for Shell’s Beaufort Sea drilling plans passed a major milestone Feb. 15 when the U.S. Minerals Management Service approved the company’s eastern Beaufort Sea exploration plan and the accompanying oil discharge prevention and contingency plan. MMS said its analysis found that Shell’s plans would not cause “undue or serious harm or damage to the human, marine or coastal environment.”

The exploration plan approval only relates to Shell’s drilling-related activities in the Beaufort Sea. On Feb. 6 MMS issued a separate permit for Shell’s proposed 2007 3-D seismic operations in the Beaufort Sea; the agency is still reviewing a Shell permit application for acquiring 3-D seismic in the Chukchi Sea.

All of the MMS approvals are subject to conditions that must be met before the planned operations can be carried out. In particular, the offshore activities require incidental harassment authorizations from the National Marine Fisheries Service; a conflict avoidance agreement with the Alaska Eskimo Whaling Commission and the North Slope village whaling captains associations; and a bowhead whale monitoring program. The lighting configuration on drill ships must be configured to minimize the attraction of birds to the structures. And Shell must verify the absence of historic shipwrecks at the Sivulliq site where the company plans to drill in 2007.

Drilling of any Beaufort Sea well will also require an MMS drilling permit.

Approval of the oil discharge prevention and contingency plan is contingent on 22 conditions being met, including the need for clarification of some of the communications arrangements and the clarification of some response procedures. MMS will also require Shell to conduct equipment deployment exercises and a tabletop exercise to demonstrate the viability of the plan.

On Feb. 16 the 50-day review period for the Alaska Coastal Management Program review for Shell’s Beaufort Sea drilling program began. In its ACMP filing Shell identified 12 possible locations for geophysical surveys, exploration and appraisal drilling — seven locations with Flaxman Island names on blocks 6658, 6707, 6708, 6709, 6765, 6824, and 6874; four locations with the name Barter Island on blocks 6801, 6802, 6962, and 7117; and one location with the name Harrison Bay on block 6222. The project description in the public notice said a total of 16 vessels would be operating in the Beaufort in connection with the drilling program in 2007.

Deadline for written comments under the ACMP review is 5 p.m. on March 19.

—Alan Bailey


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