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Seeking partner(s)
Shell doesn't want to operate, wants company to share risk & operate
Kay Cashman Petroleum News
Shell Offshore Inc., operator and 100% working interest owner of the nearshore West Harrison Bay unit, has made it clear that while it is not interested in operating in Alaska, neither does it appear to be interested in relinquishing the 81,000-acre unit that lies so close to major Nanushuk formation discoveries west of the central North Slope.
The West Harrison Bay unit lies northwest of Santos' Pikka unit and approximately 7 miles directly north of ConocoPhillips Alaska's Bear Tooth unit, which holds the big Willow discovery.
(See map in the online issue PDF)
Shell is looking for a partner, or partners, to buy into the unit to share the exploration cost and risk - and to take over the role of operator.
Under its current plan of exploration, or POE, with Alaska's Division of Oil and Gas, Shell or the company it designates as operator is obligated to drill its first exploration well in the West Harrison Bay unit this coming winter.
In its Oct. 6, 2021, filing of a second plan of exploration application with Alaska's Division of Oil and Gas, Shell said that "over the last year, Shell has worked diligently to identify another company(ies) to acquire an interest in the West Harrison Bay unit leases, take-on the role of unit operator and share the exploration risk and cost associated with advancing the understanding of the resource potential of the WHBU leases.'s
The company told the division that it "had made solid progress toward that objective prior to the Covid-19 pandemic and the resulting collapse in oil prices."
While oil projects on the North Slope "remain attractive" the continuing economic uncertainty resulting from the Covid-19 pandemic have impacted Shell- s ability to bring another company(ies) to this project in a number of ways," Shell told the division in that 2021 filing.
"Finding more shallow Nanushuk oil has the potential to be quickly brought into development and production alongside the two other large Nanushuk discoveries in the vicinity's (Pikka and Willow) would "greatly benefit the state and local communities in terms of increased reserves leading to increased future royalties and taxes, greater competition for state acreage, and expanded employment opportunities and demand for services on the North Slope," Shell said.
Approved in November 2021 On Nov. 18, 2021, the division approved a 2021 plan of exploration amendment/second plan of exploration for the West Harrison Bay unit.
The approval was to allow Shell time "to finalize commercial arrangements with other prospective project participants and designate a new unit operator."
The second POE would allow the operator until the end of the 2023-24 winter drilling season to complete the first of two proposed wells required under the August 2020 unit agreement, "focusing on the Nanushuk formation as the primary target rather than the Torok formation as previously required, and also eliminate a requirement in the unit agreement that the unit operator acquire additional seismic over the flex wave area by the end of September 2022."
Upon evaluation of drilling completed in the 2023-24 and 2024-25 drilling seasons, the new operator would submit either a further POE for the West Harrison Bay unit or a plan of development no later than the end of 2025.
Per division and Shell In response to Petroleum News regarding the status of the West Harrison Bay unit, on May 26 the division said the unit formation decision was effective Dec. 7, 2020, so the expiration would be Dec. 7, 2025, given the standard five-year primary term in the unit agreement.
Further, the division said Shell's "plan of exploration was also extended through 2025 and their 2022 work commitment deadlines were removed, so they have until the end of the 2023-2024 drilling season to do specific work. If such work commitment deadlines are missed, the division "will issue a notice or decision regarding that situation."
The most recent comment Shell Global has made about the West Harrison Bay acreage was in August 2022: "In the USA, Shell holds one license interest in the North Slope area of Alaska. In December of 2020, Shell received regulatory approval to combine our near-shore leases in West Harrison Bay into a single unit and Shell is currently seeking a co-owner to operate the unit.s"
In addition, "Shell ended frontier offshore exploration drilling operations in Alaska in 2015," Shell Global said, referring to the company's remote Chukchi Sea leases.
Finally, Shell Global said: "We also hold a number of licenses from our previous activities in the Canadian Arctic, although we do not plan to develop these licenses."
Strong local support North Slope (and Pikka) partners Santos and Repsol - two major international exploration and production companies - approved the $2.6 billion final investment decision to develop the first phase of their Pikka project, with production to begin in May 2026 at a projected throughput of 80,000 barrels per day. These same owners received approvals in 2022 for two new units, Quokka and Horseshoe, with exploration drilling to follow.
On March 13, the U.S. Interior Department issued a record of decision for the Willow oil project in the National Petroleum Reserve-Alaska, denying two of the five drill sites proposed by ConocoPhillips, but allowing development with three sites.
The $7-7.5 billion Willow project will generate 2,000 jobs in the construction phase.
Willow will create 300 permanent jobs and is expected to produce 180,000-200,000 barrels of oil a day, with production estimated by the company to begin Sept. 1, 2029.
Interior's decision drew praise from ConocoPhillips, labor unions, Alaska's Legislature and its congressional delegation, Alaska Gov. Mike Dunleavy, as well as Native and North Slope entities, such as Voice of the Arctic Inupiat, North Slope Borough, Inupiat Community of the Arctic Slope and Arctic Slope Regional Corp.
The Voice of the Arctic Inupiat is a nonprofit organization established in 2015 by the region's collective Inupiat leadership to speak with a unified voice on issues impacting the North Slope Inupiat, their communities, their economy and their culture. Its members include local government, business, tribal and civil society across the North Slope.
Nagruk Harcharek, president of Voice of the Arctic Inupiat, said there is "majority consensus" in the region in favor of the project, calling Willow a "lifeline" for residents.
These potential successive developments represent a runway of opportunity for these companies to establish robust new production on the North Slope.
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