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Vol. 15, No. 23 Week of June 06, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Liberty not included

Interior moratorium covers deepwater drilling; Shell Alaska delay separate

Eric Lidji

For Petroleum News

The new federal moratorium on deepwater drilling won’t delay the Liberty project BP hopes to begin drilling this year from an existing island off the North Slope.

“The deepwater moratorium does not apply to this particular project, which is based from a man-made island and would potentially be drilling directionally into formations under shallow water,” Frank Quimby, public information officer for the U.S. Department of the Interior, told Petroleum News on June 2. “If drilling permit applications are submitted for the project, the Department of the Interior will review them at the appropriate time and determine, based on safety and other considerations, whether the project should move forward with drilling under federal waters.”

The Obama Administration on May 27 announced a six-month “pause” in deepwater drilling in the Outer Continental Shelf, as a response to the ongoing oil spill following the explosion of an offshore drilling rig at a BP exploration project in the Gulf of Mexico. For the purpose of the moratorium, “dee water” is defined as being deeper than 500 feet.

The Liberty project would develop an OCS reservoir in federal jurisdiction using ultra extended reach drilling from the Endicott satellite drilling island, located in state waters.

BP plans to apply for drilling permits at Liberty “closer to the first development well spud date, probably by fall,” according to local spokesman Steve Rinehart, who added “MMS has approved BP’s Development and Production Plan for the Liberty project.”

He said BP hopes to have first oil production by 2011.

In addition to the moratorium on deepwater drilling, the Obama Administration also cancelled a pending lease sale in the Gulf of Mexico and a planned lease sale off the coast of Virginia, suspended 33 exploratory wells currently being drilled and, most importantly for Alaska, suspended two exploration programs planned for Arctic waters this summer.

Those programs belong to Shell Oil, which planned to drill three wells in the Chukchi Sea and two wells in the Beaufort Sea this summer. Because of seasonal drilling limitations, the suspension effectively pushes back those programs one whole year.

Alaska added on to report

The moratorium and other actions followed a U.S. Department of the Interior report proposing safety measures after the Deepwater Horizon offshore drilling rig exploded in late April, causing a leak of crude oil from the ocean floor that remains unstaunched.

That report, focused on safety issues in the Gulf of Mexico, does not make recommendations about Alaska. The two Shell projects would drill in about 150 feet of water, less than the 500-foot threshold for suspension set out by the new moratorium.

“It was a decision made with an abundance of precaution. … It’s not exactly part of the 30 day report, but it’s related to it,” Quimby said about the “time out” for Alaska, as well as the cancellation of Lower 48 lease sales.

He added that the DOI decision was not a denial of drilling permits, because Shell had only announced its intention to drill this summer, but had yet to file for drilling permits.

While Alaska is not examined in the report, at least four Alaskans and former Alaskans with engineering or drilling experience contributed to it as “expert consultants.”

Concerning the OCS exploration and production in general, the report makes recommendations about blowout-preventers, well control systems and safety guidelines.

For all current and future OCS drilling, companies will be required to show that their safety plans meet the recommendations outlined in the report. That comes from a June 2 announcement from Bob Abbey, director of the Bureau of Land Management and recently appointed acting director of the U.S. Minerals Management Service.

Abbey also asked Congress to extend the 30-day timeline for reviewing exploration plans to a 90-day timeline that can be extended if additional reviews are deemed necessary.

The DOI and the Council on Environmental Quality are reviewing how the MMS uses “categorical exclusions” in reviews under the National Environmental Policy Act.

Shell: changes in place now

Shell believes the recommendations “are much like our global offshore drilling standards,” according to a prepared statement from spokeswoman Kelly op de Weegh.

She said Shell uses “redundant safety systems” to monitor wellbore pressure and tests its blowout preventers internally, in addition to the testing required by regulation.

“We also utilize a set of practices, collectively called a Safety Case, which is also recommended in the DOI’s report. Shell’s Safety Case is a process drawn from decades of exceptional offshore performance, state-of-the-art technology, people expertise, and addresses the inherent risks in offshore exploration and production,” op de Weegh wrote.

The North Slope Borough, the municipality closest to the drilling, supported the decision.

“The president did what he had to do,” Borough Mayor Edward Itta said in a prepared statement on May 27. “The spill has confirmed the many questions we have about safe practices and federal oversight. Everyone benefits from a delay at this point.”

Itta said the borough sent staff to Washington, D.C., to “get a better sense of what our Congressional delegation is thinking,” and planned to hear from the Alaska heads of BP and Shell at an assembly meeting. “After that, we’ll decide on our future course,” he said.

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