THE EXPLORERS 2004: Shell drops leases, still hot for Alaska

—reprinted in part from Petroleum News, Oct. 31, 2004

Shell recently dropped its oil and gas leases on Alaska’s North Slope, but asked Petroleum News to stress it is still very interested in Alaska.

According to Mapmakers Alaska, Shell recently surrendered 10 central North Slope leases picked up in a 2002 state oil and gas lease sale for $2.4 million.

“Rents were coming due” on the 56,000 acre parcel south of the Kuparuk River unit. The acreage was “relinquished” by Shell “after a routine internal assessment of the area,” Shell spokeswoman for EP Americas, Kelly op de Weegh, told Petroleum News Oct. 25.

“We felt that the potential of the area did not meet our investment criteria and the rentals have not been paid. But I want to stress, our decision to surrender what we consider to be a small, non-material leasehold does not affect our goal to continue evaluating investment opportunities in Alaska,” op de Weegh said.

“That specific area” of the North Slope does not interest Shell, she said, asking that Petroleum News “stress that we do not view this as an exit from Alaska. We are spending a lot of effort on evaluating Alaska.”

Op de Weegh’s assertion that Shell is still interested in Alaska coincides with remarks by Shell’s global exploration director, Matthias Bichsel, on Sept. 22 (see the Sept. 26 issue of Petroleum News).

Bichsel, said Shell “wants to develop a bigger exploration position in Alaska, which it sees — alongside North Africa, the Russian Arctic and the global deepwater — as one of the key areas of upstream potential for the international oil and gas industry.

Shell interested in “western part” of Alaska

Bichsel said that the 10 leases south of Kuparuk were picked up by the local operating unit “on a purely opportunistic basis.” And that Shell has enough information in place after the “thorough evaluation” of the last 18 months to “go after a focused and targeted approach in the future.”

Shell, he said, was interested in the “western part” of Alaska, onshore and offshore.

Op de Weegh would not elaborate on “western part,” which could include on and off shore the National Petroleum Reserve-Alaska, the Chukchi Sea, or on and offshore the Bristol Bay basin in southwestern Alaska.

In mentioning Shell’s continued interest in Sakhalin and West Siberia, Bichsel said, “You have a bit of a theme there — Sakhalin, West Siberia and Alaska — which is the Arctic, which requires big funds, which requires technology, tenacity, staying power, which I think companies like ours are very well suited to.”

Op de Weegh would not comment on any past or current discussions with BP to acquire BP’s North Slope assets, but Bichsel did say in September that Shell could achieve its goals in Alaska through lease sales, without the need to do deals or make acquisitions.