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Vol. 15, No. 21 Week of May 23, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Shell moves forward

Mobilizes out-of-state assets for shallow water Chukchi and Beaufort drilling

Alan Bailey

Petroleum News

Despite the unfolding oil-spill disaster in the Gulf of Mexico, Shell is planning to go ahead with its 2010 exploration program in the Beaufort and Chukchi seas off northern Alaska. The company has started moving vessels and other equipment from distant locations, in preparation for assembling its Arctic drilling fleet, Shell’s Alaska vice president told Petroleum News May 14.

“Our assets are moving,” Pete Slaiby said. “… We’ve mobilized every piece of equipment that’s not local (in Alaska).”

Slaiby expressed his confidence in the safety of his company’s planned operations, saying that drilling conditions in the Alaska OCS will be very different from those in the Gulf of Mexico.

“We’re in 150 feet of water, versus 5,000 feet,” Slaiby said. “We have about one third of the reservoir pressure.”

The Chukchi Sea wells will bottom out at around a depth of 8,000 feet, as compared to the around 18,000-foot depth of the Gulf of Mexico well that went out of control, Slaiby said.

Slaiby said that Shell is confident in the anticipated relatively low pressure of its planned Alaska wells because of experience from previous drilling in adjacent fault blocks, coupled with information gleaned from seismic data and other subsurface data.

And because of the shallow water depths, the drilling operation will be much more straightforward than in the deepwater Gulf of Mexico, with just a 150-foot hydraulic line extending from the drillship to control the blowout preventer at the wellhead in the seafloor and a relatively short length of drill pipe between the drilling vessel and the wellhead, Slaiby said.

Slaiby said Shell is planning to use an especially robust system for sealing the well down hole. The company also is considering an upgrade to the well blowout preventer that will be used, possibly adding a second shearing ram — the hydraulic ram of last resort that slices through the drill pipe to seal the well — and possibly adding a set of blowout preventer controls outside the seafloor cavity that the blowout preventer will sit in.

Same-season relief well capability

Slaiby also addressed the question of contingency planning for the drilling of a relief well, a secondary well that would penetrate and plug an out-of-control well in the unlikely event of a well blowout. In light of the Gulf of Mexico disaster, in which the well blowout resulted in the destruction of the drilling vessel, some have questioned Shell’s documented plan to use the Frontier Discoverer, the drilling vessel for Shell’s operations, for any necessary relief well drilling.

And, given the relatively short open water season for drilling in the Arctic offshore, time is of the essence in moving a drillship onsite to drill a relief well before the onset of winter sea ice brings a halt to drilling operations.

However, Slaiby says that Shell plans to hold in reserve the Kulluk, a drillship that Shell owns and that is currently moored in McKinley Bay on the coast of the Canadian Beaufort Sea.

“The policy is that we would have the Kulluk ready for a same-season relief well,” Slaiby said.

However, Shell also is looking at other possibilities for a backup drilling rig, he said.

Oil spill response equipment on hand

Slaiby also said that Shell will have its oil spill response arrangements fully in place before any drilling starts. The company has sent some equipment and material to the Gulf of Mexico to help with the response effort there but would not start any drilling in the Alaska offshore unless its Alaska spill response resources have been returned, he said.

Shell officials are now embarking on visits to the North Slope to meet with people from the local communities, including people from the North Slope Borough and from the Northwest Arctic Borough, for discussions about how Shell’s Arctic drilling will compare with drilling in the Gulf of Mexico, Slaiby said.

“We want to tell the story,” Slaiby said. “We recognize that it’s really important to the communities to have an opportunity to discuss their concerns.”

Must get remaining permits

Meantime, Shell is confident that it can obtain the remaining permits that it needs for its Alaska drilling program in time to move its drilling fleet north through the Bering Strait in early July, as the Arctic sea ice retreats to the north.

The company is particularly pleased with the unanimous decision by a panel of judges in the U.S. Court of Appeals for the 9th Circuit to reject an appeal against approval of the company’s 2010 Chukchi Sea and Beaufort Sea exploration plans.

“It says a lot for the thoroughness with which these permits have been worked,” Slaiby said, adding that in its 2010 plans Shell had rectified some weaknesses in earlier 2007 plans.

The U.S. Environmental Protection Agency had issued the company’s air quality permits but those permits are being appealed in the Environmental Appeals Board. Shell also needs incidental harassment authorizations and letters of authorization from the National Marine Fisheries Service and the U.S. Fish and Wildlife Service for the unintentional disturbance of marine mammals.

However, Slaiby said that Shell has signed a conflict avoidance agreement with the Alaska Eskimo Whaling Commission, agreeing on procedures to avoid disturbance to subsistence whale hunting by North Slope communities.

But the U.S. Minerals Management Service drilling permits that Shell will need prior to any drilling operation present a significant issue, given that the Department of the Interior has placed a hold on the issue of any new permits pending the delivery in late May of an offshore drilling safety report as a follow up to the Gulf of Mexico disaster.

DC appeal still an issue

And another issue sitting in the wings is an appeal in the U.S. Court of Appeals for the District of Columbia against the MMS 2007-2012 outer continental shelf lease sale program that included the 2008 Chukchi Sea lease sale in which Shell purchased its Chukchi Sea leases. MMS is about to publish a revised version of the lease sale program, in response to a court order to revise the environmental analysis for the Alaska lease sales in the program.

A court rejection of the revised version of the lease sale program will lead to uncertainty over the status of the Chukchi Sea leases.

In that case, Shell will likely go ahead with its planned Beaufort Sea drilling, even though the company views its Chukchi Sea program as having higher priority, Slaiby said.

“If things go badly in the DC Circuit, the Beaufort would clearly still be an option.”



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Shell tells MMS about safety precautions

In mid-May, following the Deepwater Horizon incident in the Gulf of Mexico, Marvin Odum, president of Shell Oil Company, sent a letter to U.S. Minerals Management Service director Elizabeth Birnbaum describing the safety precautions that the company plans for its operations in the Chukchi and Beaufort seas. In addition to explaining the differences between drilling in the relatively shallow waters of the Alaska outer continental shelf and drilling in the deepwater Gulf of Mexico, Shell outlined the specific technologies that the company believes would prevent a well blowout accident.

Those technologies include downhole technology that ensures hydraulic isolation of an underground oil reservoir, and a two-barrier system within the well to prevent any unintended flow of fluids up the well. The blowout preventer, the device that will sit at a wellhead as a last line of defense against loss of well control, has been extensively inspected and tested, and will undergo further testing before use, Odum said.

Moreover, unlike the well in the Gulf of Mexico incident, Shell’s planned 2010 Arctic wells will be exploratory in nature, and will not be converted for future production operations, Odum said. And any coring of rock samples would be done by drilling a secondary, bypass hole, after using the initial well hole to determine parameters such as reservoir pressures and fluid content.

Odum also emphasized several safety aspects of Shell’s program, including plans for curtailing drilling operations when necessary, and a capability to respond within one hour to any oil spill emergency.

And, among the company’s arsenal of oil spill response equipment, Shell will have remote operating submarines and a prefabricated subsea coffer dam. The coffer dam will have technology to prevent clogging by methane hydrate, Odum said.

—Alan Bailey

Storm of protest over Shell’s plans

In the wake of the oil spill in the Gulf of Mexico, numerous environmental organizations have raised a storm of protest over Shell’s plans to drill exploration wells in the Chukchi and Beaufort seas in 2010. The Gulf of Mexico incident demonstrates the risks associated with offshore drilling — a similar oil spill in the Arctic offshore would cause huge environmental damage, the organizations say.

“With no way to clean up a spill in the Arctic’s harsh and icy conditions and limited capacity to respond to a major spill, the risk is too high in the Arctic — especially since the lessons from the Gulf have yet to be learned,” said Rebecca Noblin of the Center for Biological Diversity, in a statement characteristic of several from the environmental community. “The Obama administration must act now to cancel this summer’s plans for offshore drilling in the Arctic before we sacrifice another one of our precious coasts.”

The Pew Environmental Group listed a string of concerns about Shell’s program, including extreme Arctic weather; the distance of well sites from shore; the lack of a support infrastructure and what Pew claims is an understatement by MMS of well blowout risks. Pew also says that oil spill cleanup technologies have not been proven to be effective in the Arctic.

—Alan Bailey