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Vol. 15, No. 28 Week of July 11, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Wait and see for Shell

Company needs clarity on government position over offshore drilling in Arctic

Alan Bailey

Petroleum News

Shell is waiting for clarity on the federal government’s position on drilling for oil in the Arctic outer continental shelf following the U.S. Department of the Interior’s imposition of a six-month drilling moratorium, Peter Slaiby, Shell Alaska vice president, told Petroleum News July 7. The moratorium, a part of the fallout from the Gulf of Mexico oil-spill disaster, forced Shell to cancel its planned exploration drilling in the Beaufort and Chukchi Seas in 2010, but the company now hopes to carry out that same drilling program in the summer of 2011.

However, with all eyes on the Gulf of Mexico, little has been said about the Arctic offshore drilling moratorium.

“We would like a measure of certainty by the end of this year,” Slaiby said, adding that Shell does not want to go into 2011 still waiting for permits, as happened in 2010.

And an appeal continues over the issuance of Shell’s Environmental Protection Agency air quality permits for its offshore drilling,

“We’re continuing to push that along,” Slaiby said.

Environmental studies

Meantime, Shell is continuing with offshore environmental baseline studies, primarily in the Chukchi Sea, during the 2010 open water season. And the company will conduct shallow-hazard surveys at sites in the Harrison Bay area of the Beaufort Sea, an area where Shell is exploring in a joint venture with Italian major Eni.

Although Shell does not anticipate any reduction in its Alaska office staffing levels as it continues to try to get its offshore drilling program under way, the cancellation of the 2010 program has resulted in the loss of 600 to 800 jobs in its planned field operations. And hiring large numbers of people and then dropping them again within a short space of time does not work, Slaiby said.

“We can’t yo-yo staffing levels,” he said.

Shell anticipates using essentially the same exploration plans in 2011 as the U.S. Minerals Management Service approved for 2010, to drill two wells in the Beaufort Sea and up to three wells in the Chukchi Sea. And Shell is confident that its plans can meet new drilling safety requirements.

Recertifying BOPs

“We were already in the process of recertifying our blowout preventers,” Slaiby said. In fact, the company maintains two sets of blowout preventers: one for the planned drilling and one as contingency for relief well drilling, he said. And, although the drillship Frontier Discoverer that Shell plans to use would provide the primary means of relief-well drilling, the company also plans to keep its own floating drilling platform, the Kulluk, on warm standby, should the Frontier Discoverer be disabled when a relief well is needed.

Shell would contract an extra marine crew with Noble Drilling for that backup drilling vessel, Slaiby said.

Slaiby also addressed comments made by Interior Secretary Ken Salazar during a congressional hearing in which Salazar said that the primary issue behind the Arctic moratorium is the question of whether there are sufficient oil spill resources in the Arctic to mount a major offshore spill response.

Shell has assembled a spill response fleet, including a purpose-built oil spill response vessel, to support its Arctic drilling operations on site.

“We will have (spill response) resources in place the moment we begin to drill,” Slaiby said, adding that Shell could also pull in other resources from elsewhere, if necessary.

Responding in sea ice

And although there are spill response issues specific to dealing with sea ice, the presence of sea ice could also bring some advantages, Slaiby said, presumably referring to factors such as the ability of sea ice to constrain the flow of oil across an open water surface. Recent research has demonstrated the feasibility of recovering spilled oil in ice conditions, while recovering oil in the 150-foot water depths of, say, the Chukchi Sea would be simpler than in the 5,000-foot depths of the Gulf of Mexico, Slaiby said.

Not only that, Arctic Alaska wells do not produce oil at the rates anywhere close to the 60,000 barrels per day worst-case scenario of a Gulf of Mexico spill, he said.

A 5,000-foot Gulf of Mexico riser — the tube that extends from the seafloor wellhead to the drilling vessel — would tend to flex much more than a 150-foot riser in the Arctic. And, whereas the break of a 5,000-foot riser loaded with fluids would drop the wellhead pressure by about 2,000 pounds, a break in a 150-foot riser would only cause a 27-pound pressure drop, Slaiby said.

But Shell sees very little risk of a blowout in its planned Arctic operations. Unlike in the deepwater Gulf of Mexico, the shallow depths in the Arctic offshore would enable the use of simple “tried and true” well control systems, with the possibility of manned intervention in a wellhead on the seafloor, Slaiby said.

Moreover, the company is comfortable from the analysis of seismic data and from evidence gleaned from previously drilled wells that reservoir pressures are relatively low in its offshore oil prospects, he said.

And Shell continues to believe that the Alaska Arctic offshore offers better prospects for new oil development than onshore regions of Alaska, including the coastal plain of the Arctic National Wildlife Refuge, Slaiby said.



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