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Vol. 18, No. 15 Week of April 14, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

’14 Chukchi well nixed

ConocoPhillips cancels its planned drilling, cites regulatory uncertainties

Alan Bailey

Petroleum News

ConocoPhillips announced April 10 that it is putting on hold its plans to drill in Alaska’s Chukchi Sea in 2014. The company said that, given the “uncertainties of evolving federal regulatory requirements and operational permitting standards” it would not be prudent at this time to make the significant financial commitment required for drilling in 2014.

“While we are confident in our own expertise and ability to safely conduct offshore Arctic operations, we believe that more time is needed to ensure that all regulatory stakeholders are aligned,” said Trond-Erik Johansen, president of ConocoPhillips Alaska.

The company cited the Department of the Interior’s recently published report from the federal interagency working group that coordinates federal permitting in the Arctic as a prime reason to pause the Chukchi drilling plans. That report recommends a more integrated approach to the management of Arctic offshore economic activities, with better alignment between stakeholders in the region and the balancing of environmental, economic and cultural objectives.

“We welcome the opportunity to work with the federal government and other leaseholders to further define and clarify the requirements for drilling offshore Alaska,” Johansen said. “Once those requirements are understood, we will re-evaluate our Chukchi Sea drilling plans. We believe this is a reasonable and responsible approach given the huge investments required to operate offshore in the Arctic.”

ConocoPhillips had been hoping to drill in 2014 in a prospect called Devil’s Paw, a 200,000-acre structure about 120 miles west of the coastal village of Wainwright, using a new state-of-the-art jack-up rig, a drilling rig with legs that can be lowered to the seafloor. The company has been doing some elaborate planning for its Chukchi Sea venture, including conducting “virtual drilling” exercises each summer, using actual weather and ice conditions to simulate what would likely happen were the drilling to actually be taking place.

Varied reactions

Alaska politicians, anxious to see oil development move ahead on the Arctic outer continental shelf, expressed disappointment following ConocoPhillips’ announcement.

“I’m disappointed that ConocoPhillips won’t be moving forward with its Arctic program next year — Alaska and the nation need the energy and the jobs that new oil production off Alaska’s coast would bring — but it’s a decision that’s not unexpected,” said Sen. Lisa Murkowski. “Companies can’t be expected to invest billions of dollars without some assurance that federal regulators are not going to change the rules on them almost continuously.”

“I am disappointed,” said Sen. Mark Begich. “I’ve spent the last four years working with the administration and industry to promote responsible development of Alaska’s Chukchi and Beaufort seas.”

On the other hand, environmental groups, who view oil exploration and development in the Arctic outer continental shelf as currently presenting unacceptable environmental risks, lauded the decision.

“Existing technology, regulations and plans are not sufficient for protecting Arctic ecosystems and opportunities for subsistence, especially in the event of a major oil spill,” said Susan Murray, Oceana deputy vice president, Pacific. “The oil is not going anywhere, but the technology and drilling standards for the region can improve.”

In February Shell announced the deferral of its Chukchi and Beaufort Sea drilling plans for this year. Statoil, the other company engaged in Chukchi Sea exploration, had earlier announced that it was delaying its planned drilling into 2015 at the earliest.



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