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Vol. 16, No. 21 Week of May 22, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Going for Chukchi again

Shell files exploration plan to drill in the Burger prospect, starting in 2012

Alan Bailey

Petroleum News

Following its early May filing of a new exploration plan for the Alaska Beaufort Sea, Shell has now filed with the Bureau of Ocean Energy Management, Regulation and Enforcement a corresponding plan for the Chukchi Sea — the company says that it anticipates drilling up to six Chukchi Sea wells, starting in the summer open water season of 2012.

The earlier published Beaufort Sea plan, described in the May 8 issue of Petroleum News, envisages the drilling of up to four wells in the Beaufort, also starting in 2012. Depending on factors such as ice and weather conditions, the company would drill up to three wells per year in the Chukchi Sea and up to two wells per year in the Beaufort Sea, using the drillship Noble Discoverer and the floating drilling platform, the Kulluk.

In addition to needing BOEMRE approval of its exploration plans, Shell will require the agency’s approval of individual drilling permits for each planned well before drilling can commence. Drilling in the Chukchi Sea is also contingent on resolution of an appeal in the U.S. District Court in Alaska against the Chukchi Sea lease sale in which Shell purchased the leases for the tracts where it plans to drill. Shell also needs air quality permits for both its Chukchi Sea and Beaufort Sea drilling operations — earlier this year the Environmental Appeals Board remanded those permits to the Environmental Protection Agency for rework following an appeal against permit issuance.

2010 plan deferred

Shell had planned to drill up to three wells in the Burger, Crackerjack and Southwest Shoebill prospects in the Chukchi Sea in 2010, but the company was forced to defer that plan in the wake of the Deepwater Horizon disaster in the Gulf of Mexico. In 2011 the company opted out of any Chukchi Sea drilling because of continuing uncertainty over the outcome of the district court appeal over the Chukchi Sea lease sale. And the company eventually abandoned a plan to drill in the Beaufort Sea in 2011 because of the remand of its air quality permit by the Environmental Appeals Board.

Shell has now filed its new Chukchi Sea plan, presumably anticipating resolution of both the district court appeal and the air quality permit appeal in time to prepare for drilling in 2012.

However, in its new plan Shell says that it wants to drill all of its wells in the Burger prospect, using the Noble Discoverer. Burger, a 25-mile-diameter structure that is known to hold a major natural gas pool some 80 miles offshore the western end of Alaska’s North Slope, was the star bidding target in the 2008 Chukchi Sea lease sale, with Shell making some massive bids to gain rights to explore the crest of the structure, including a $105 million bid on one tract. ConocoPhillips purchased some tracts around the structure’s perimeter.

Drilled in 1990

Shell is already somewhat familiar with the prospect, having drilled the structure in 1990 as part of an industry exploration drilling program that resulted in five wells, the only wells ever drilled in the Chukchi Sea.

The Burger well bottomed out at a depth of 8,202 feet, having lost mud circulation in a tarry rock after penetrating a 107-foot thick, gas bearing sandstone of Jurassic age. Although the well demonstrated the existence of a substantial gas resource in the sandstone, the total extent of the gas pool remains unknown. There is also the intriguing possibility of an undiscovered oil accumulation below the gas.

Geologists in the U.S. Minerals Management Service, the precursor agency to BOEMRE, estimated that there might be anywhere from 2 trillion to 63 trillion cubic feet of natural gas in the Burger structure, with a most likely estimate of around 14 tcf.

According to Shell’s new Chukchi Sea plan, if the company now receives the go ahead to drill again at Burger, the company will drill to depths below its primary exploration target, presumably to test the geology and hydrocarbon potential lower down in the rock sequence at the prospect. Shell says that it has already collected and reviewed shallow hazard data for its proposed drilling sites. Each site lies in a different lease block.

Start in July

Shell’s drillship will pass north through the Bering Strait at the beginning of July 2012, ready to start drilling as soon as weather and ice conditions permit, with drilling continuing until the end of October 2012.

An ice management vessel, an anchor handling vessel and two offshore supply vessels will support the drilling operations. The supply vessels will carry supplies to the drilling fleet from Dutch Harbor in the Aleutian Islands or from the Chukchi Sea coastal village of Wainwright. Aviation operations in support of the offshore activities will be conducted from Barrow and Wainwright.

Ice management during drilling operations would include the deflection by the ice management and anchor handling vessels of any ice floes that might threaten the drilling vessel, with drilling operations being stopped and the drill vessel moved off site in the event of severe ice conditions.

Shell has agreed on a plan of cooperation with North Slope communities, to mitigate any potential impacts of the drilling on subsistence hunting. And a communication plan with the communities includes the operation of communication centers in coastal villages.

Shell is also applying to the National Marine Fisheries Service and the U.S. Fish and Wildlife Service for authorizations for the incidental harassment of marine mammals such as whales, seals and polar bears during offshore operations.

Spill response fleet

Shell’s oil spill response fleet will include an oil spill response vessel and an oil spill response barge, stationed in the vicinity of a drilling operation. An Arctic oil storage tanker will be staged for availability on site within 24 hours of an oil spill incident. Shell is also constructing a containment dome to cap a well in the event of a well blowout — the containment dome would enable oil escaping from the well to be captured and channeled through a pipe for collection by surface vessels.

Shell would have additional oil spill response vessels and equipment available, ready to take action within a workable timeframe, if necessary, including an ice-strengthened oil spill response barge for nearshore operations, Shell’s Chukchi Sea exploration plan says.

The Noble Discoverer would be Shell’s primary facility for the drilling of a relief well to plug an out-of-control well. However, were the Discoverer to become incapacitated, the Kulluk would also be available for relief well drilling.

However, Shell’s well control plan emphasizes the company’s focus on oil spill prevention through careful well planning, early detection of pressure kicks and real-time monitoring of drilling operations. The company has sad that a well blowout in the straightforward, shallow-water drilling conditions of the Chukchi Sea is extremely improbable.



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Shell pushes for deadline on Chukchi SEIS

While Shell has filed a plan proposing exploration drilling in 2012 in the Chukchi Sea, the company has also been asking the U.S. District Court in Alaska to set a deadline for the Bureau of Ocean Energy Management, Regulation and Enforcement to complete a special environmental impact statement for the 2008 Chukchi Sea lease sale in which Shell bought its Chukchi Sea leases.

As a consequence of an appeal against the lease sale, in July 2010 the court ordered that BOEMRE rework certain aspects of the lease sale EIS, with the court banning lease-related exploration activities in the Chukchi until BOEMRE has changed the EIS to the court’s satisfaction. BOEMRE made the necessary EIS changes and published a draft SEIS in October. But in response to concerns raised in public comments on that draft, the agency has voluntarily elected to add a new section to the document, analyzing the potential impacts of a very large oil spill in the Chukchi Sea. The agency now plans to publish a new draft SEIS later in May, with a public review period ending in early July and the final record of decision on the new SEIS likely to come in late October.

Remove uncertainty

Shell, needing removal of the legal uncertainty over its Chukchi Sea leases before moving ahead with its drilling operations planned for 2012, has been pressing the court to require BOEMRE to expedite completion of the SEIS. In April District Court Judge Ralph Beistline rejected a request by Shell to set a July 1 deadline for that completion. Beistline, while sympathizing with Shell’s position and commenting that the new oil spill analysis goes beyond what the court had required, said that it is also important that the SEIS is “technically and legally sound” in the wake of the 2010 Gulf of Mexico oil spill.

On May 12 Beistline issued an order supporting a revised deadline request from Shell, requiring BOEMRE to complete the SEIS on or before Sept. 15, 2011. However, both the Department of the Interior and the plaintiffs in the appeal, the Native Village of Point Hope, the Inupiat Community of the Arctic Slope and 12 environmental organizations, have objected to Shell’s latest request.

Interior says that it is acting as quickly as it can to meet Shell’s needs but that Shell’s proposed deadline would unacceptably truncate the SEIS public notice and comment period, thus jeopardizing the rights of people with interests in the impacts of the lease sale. Moreover, the fallout from prematurely issuing an SEIS that could prove weak in the face of judicial review would present a greater risk to Shell’s plans than the risk presented by BOEMRE’s planned SEIS completion schedule, the agency says.

The plaintiffs told the court that, following legal precedent, the court should defer to BOEMRE’s expertise in determining the length of time that it will take to complete the SEIS. The plaintiffs also objected to a request by Shell that the court should require BOEMRE to issue monthly status reports that include reports on progress in reviewing Shell’s new Beaufort and Chukchi Sea exploration plans. It is premature for BOEMRE to review plans for leases that are themselves “the subject of reconsideration,” the plaintiffs wrote in a May 16 court filing.

A flavor of what BOEMRE may view as a very large Chukchi Sea oil spill in its Chukchi Sea SEIS appeared in an internal BOEMRE memo describing the possibility of a well blowout with an initial oil flow rate of 61,000 barrels per day, leading to an eventual spill size of perhaps 1.4 million barrels. BOEMRE has emphasized that these figures represent a hypothetical maximum discharge scenario for informing regulatory decision makers, rather than an assessment from an actual Chukchi Sea oil prospect.

According to Shell’s recently filed Chukchi Sea exploration plan, in the event of a blowout the worst-case discharge of oil from the wells that the company plans to drill in the Burger prospect could hit a peak flow rate of 23,100 barrels per day, possibly leading to a spill size of 669,479 barrels in a worst-case relief well drilling situation. Shell says that its oil spill response contingency plan accommodates a maximum oil discharge rate of 25,000 barrels per day and a spill size of 750,000 barrels, larger volumes than the company’s worst case estimate for drilling at Burger. However, Shell has said that its planned Chukchi Sea wells would be very straightforward to drill, presenting an extremely low blowout risk.

—Alan Bailey