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Shell looks to Bristol Bay, sees platforms Company unveils vision of LNG development in the fish-rich area of Southwest Alaska; federal waters in area closed to leasing Wesley Loy Anchorage Daily News
Dutch oil giant Shell is fishing for an ambitious new oil and gas development in Bristol Bay, a remote corner of Southwest Alaska that once booted out the oil companies.
The plan would involve installing offshore production platforms in the bay’s fish-rich waters — which are now off-limits to drillers — and piping natural gas across the rugged Alaska Peninsula to a new processing plant and tanker port on the Gulf of Alaska.
Major oil companies often prefer to hold their cards close to the vest. But in the first week of October a land agent from Shell International Exploration and Production in Houston candidly laid out the company’s Bristol Bay vision for commercial fishing representatives meeting at the Hilton Anchorage hotel. Shell not shy, says Nady Two to four platforms might go northwest of Nelson Lagoon, he said, producing gas that would be super chilled into liquefied natural gas, or LNG, for shipment to the West Coast via Mexico or Canada.
Shell’s plan is nowhere close to reality. It would face many regulatory, geologic and business hurdles to move forward, a federal official said.
But it does demonstrate rising industry interest in a place that historically has shunned drillers. And it signals a new chance for Alaska to cash in on the great global competition to supply the energy-hungry Lower 48 with gas.
The Shell land agent, Gregg Nady, told his small audience Oct. 6 that fishermen and oil men have peacefully coexisted offshore for decades around the world, and the same could hold true in Bristol Bay, one of the world’s top sources not only of salmon but also king crab and other seafood.
Nady added that Shell isn’t gun-shy about venturing again into Bristol Bay.
His company — ranked No. 4 on Fortune magazine’s list of the world’s top companies in terms of revenue, behind Wal-Mart, BP and ExxonMobil — was among several oil firms that in 1988 spent more than $95 million for Bristol Bay leases, only to see spill-wary fishermen, environmentalists and Alaska politicians persuade the federal government to buy back the leases in 1995.
That lease sale was nearly 20 years ago, Nady noted.
“That’s 20 years of track record for the industry operating offshore that we didn’t have back then,” he said. “We feel it’s a great track record.” Bristol Bay has been sidelined When it comes to oil and gas production, the state’s main focus historically has been the North Slope and Cook Inlet. State leaders desperately want a pipeline to carry the Slope’s vast gas reserves, at least 35 trillion cubic feet, to the gas-starved Lower 48.
Bristol Bay long has been a side attraction. Explorers have drilled more than two dozen wells since 1903, nearly all of them on land.
But the last well was sunk in 1985, and the Exxon Valdez spill in 1989 combined with record high sockeye salmon prices in those days to slam the door on drillers in Bristol Bay — seemingly forever.
Since then, however, even Bristol Bay residents have warmed to oil and gas, mainly due to salmon prices collapsing in the face of competition from foreign, farm-raised salmon. A harvest that was worth more than $200 million at the docks in 1990 has dwindled to less than half that, causing major job and public revenue losses for local people and governments.
On Oct. 26, the state plans to hold an oil and gas lease sale along the Alaska Peninsula.
And the Bush administration is thinking about lifting the ban on offshore leasing in what is known as the North Aleutian Basin in Bristol Bay, as well as other areas of U.S. coastline now closed to drillers. (The deadline for public comments to the federal Minerals Management Service was Oct. 11.) Offshore looks most promising Geologists believe Bristol Bay’s offshore areas might hold much more oil and gas than the land along the peninsula.
Shell’s Nady told the fishing group the North Aleutian basin might hold 6.8 trillion cubic feet of natural gas and 233 million barrels of crude oil and condensate.
The gas could sustain a liquefaction plant in Balboa Bay, near Sand Point, for 25 years. The project could produce thousands of construction and operating jobs, gas for villages, and billions of dollars in federal and local taxes and royalties, he said.
Fishermen and platforms long have occupied the same, often storm-tossed waters in the North Sea, the Gulf of Mexico and in Cook Inlet, where the nation’s only LNG export dock has operated for many years, Nady said. Shell’s good neighbor policy What’s more, he offered, oil industry helicopters have been known to save fishermen in distress, and Shell has a “good neighbor policy” in case of damage to fishing equipment.
Fishing representatives, some saying they were hearing of Shell’s plans for the first time, sounded leery.
“The Alaska experience with the Exxon Valdez was far from a good neighbor result,” said John Gruver, who helps manage a fleet of trawl boats. He was referring to fishermen and other plaintiffs still waiting for courts to decide whether Exxon has to pay a $5 billion judgment for the 1989 spill.
“In essence,” said Arni Thomson, a crab boat lobbyist, as he pointed to Shell’s Bristol Bay map, “that’s one of the richest fishing areas in the world.”
“All that would be taken into account,” Nady told the group.
John Goll, who heads the Minerals Management Service in Alaska, stressed that leasing in Bristol Bay remains a distant possibility, and the agency is neutral on the idea.
“Remember, that is all hypothetical,” he said of Shell’s plan. “There’s so many ifs, ands and buts.”
Editor’s note: This story was published Oct. 8 by the Anchorage Daily News.
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