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Vol. 14, No. 19 Week of May 10, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

Planning again on OCS

Shell withdraws its Beaufort Sea exploration plan before submitting new plan

Alan Bailey

Petroleum News

After nearly two years in which, as a consequence of litigation in the U.S. Court of Appeals for the 9th Circuit, not a single Shell drill bit has ground its way into the Alaska Beaufort seafloor, the company notified the U.S. Minerals Management Service on May 6 that it was withdrawing its 2007 to 2009 Beaufort Sea exploration plan. The company says that it is about to submit a scaled-down plan for 2010, a plan that recognizes the concerns of North Slope stakeholders about the pace with which the company has been trying to pursue its drilling objectives.

“Over the last three years, Shell’s Beaufort Sea drilling objectives have become more focused with the acquisition and analysis of additional seismic data,” said Pete Slaiby, Shell’s Alaska general manager, in announcing the plan withdrawal. “As a result, the 2007-2009 plan no longer represents Shell’s current drilling approach. …We have listened closely to stakeholders and particularly the concerns around the size and pace of exploration plans, and we have adjusted our plans accordingly.”

Reduced scope

The new plan will include a one-year drilling program, rather than a three-year program; will involve the use of one drilling rig, rather than two; and will envisage the drilling of two wells rather than four. The Frontier Discoverer drillship that Shell plans to use for the drilling will be fitted with new air emissions technology.

“It’s my hope this new program will further prove to North Slope stakeholders that Shell values their feedback and respects their ideas and concerns,” Slaiby said. “Our new plan of exploration makes every effort to address North Slope concerns and we are looking for support on this approach.”

Shell spokesman Curtis Smith told Petroleum News May 6 that Shell would be submitting its new plan to MMS within the next 48 hours and that the two wells that the company hopes to drill in 2010 would be in the area of the Sivulliq prospect, on the west side of Camden Bay, offshore the eastern end of the North Slope. Sivulliq (formerly known as Hammerhead) is a known oil pool containing perhaps 100 million to 200 million barrels of oil and had been a primary target of Shell’s withdrawn exploration plan, although that plan had proposed the drilling of more wells and the targeting of a second prospect in the Camden Bay area.

Smith said that Shell also plans to drill in the Chukchi Sea in 2010, but that the company will submit a separate exploration plan for that project. Slaiby has said previously that Shell plans to use the Frontier Discoverer for both Beaufort Sea and Chukchi Sea drilling in 2010.

By scaling down its offshore exploration drilling program Shell is addressing the issue of the cumulative impact of offshore activities, a major focus of the concerns relating to the withdrawn plan, Smith said. There will be less activity on the water and less steel on the water, and the scaled-down operation will demonstrate Shell’s capability to safely conduct offshore drilling, he said.

However, Shell also said that the reduced exploration program would result in fewer jobs and fewer contracting opportunities than had previously been anticipated.

Harold Curran, chief administrative officer for the North Slope Borough, told Petroleum News May 7 that, although the borough opposes oil and gas exploration and development on the outer continental shelf, the borough welcomes the fact that, in response to the concerns of North Slope communities, Shell is scaling back its plans for offshore operations and is planning to use improved emissions technology. And the borough is pleased that Shell has withdrawn its 2007 to 2009 exploration plan, an outcome that the borough sees as a vindication of concerns about MMS approval of that plan.

On the other hand, the borough wants to see the 2010 plan before coming to any final conclusions about it.

“We’re pleased with what we know,” Curran said. “We’re going to have to take a hard look at that (plan) application to see that it meets all of our concerns.”

Approved 2007

Shell’s 2007 to 2009 exploration plan, approved by MMS in February 2007, originally proposed the use of two drilling vessels to drill three wells at Sivulliq in 2007, and the subsequent drilling of three to four wells per year in the company’s Beaufort Sea leases in 2008 and 2009. A fleet of ice-rated vessels would have supported the drilling operations, and Shell commissioned and equipped a brand new 301-foot, ice-rated oil spill response vessel to head a spill response fleet that included a 500,000-barrel double-hulled tanker.

But skeptical of Shell’s ability to clean up an oil spill in ice-laden water and worried about the potential impact of offshore industrial activity on subsistence hunting, especially the hunting of bowhead whales, the North Slope Borough and the Alaska Eskimo Whaling Commission, together with several environmental organizations, appealed MMS approval of the exploration plan, saying that MMS had not performed an adequate environmental analysis of Shell’s proposed activities.

In July 2007, as a Shell fleet was about to embark on the company’s first drilling season under the contested exploration plan, the 9th Circuit court placed an injunction on Shell’s planned drilling while the appeal against the exploration plan was in progress. The court heard oral arguments in the case in December 2007. In November 2008 the court upheld the appeal and required MMS to carry out a further environmental evaluation of Shell’s plan. However, in March 2009 the court announced that it was reconsidering its decision, so that the court case has not yet been resolved and the drilling injunction remains in place.

Drilling canceled

Faced with the injunction, Shell canceled its planned 2007 Beaufort Sea drilling. In early 2008 the company said that in the coming summer it planned to drill some top-hole wells using a single floating drilling platform, the Kulluk; but the company eventually had to cancel its 2008 drilling program. And in October 2008 the company said that it hoped to use the Kulluk to drill in the summer of 2009 at two specific Sivulliq sites, a plan that then sank in the aftermath of the November court order.

In a separate unresolved piece of litigation the North Slope Borough, the Alaska Eskimo Whaling Commission and several environmental organizations appealed the Environmental Protection Agency’s air quality permit for the Kulluk, issued in 2008 for Shell’s then-planned Beaufort Sea drilling operations.

But, although Shell has not been able to drill in the Beaufort Sea, the company has during the past two summers conducted shallow hazard surveys around potential drilling sites, as well as surveying a possible pipeline route from Sivulliq to the shore. In the summer of 2008 the company carried out 3-D seismic surveys in the Beaufort Sea.

And Shell has continued a dialogue with North Slope communities about how to address their concerns.

The company has established a subsea acoustic monitoring program to obtain data about the migration of marine mammals such as whales. And onshore the company has been operating communications centers during the summer in North Slope communities, to facilitate communications between offshore industrial activities and subsistence hunters.

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