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She(ll) loves me, She(ll) loves me not, She(ll) loves me? In 2001 Shell re-entered Alaska, talked of 2004 drilling; today, Shell’s plans are on hold, but it’s keeping an eye on developments in the state Kay Cashman PNA Publisher
In late October, landmen from three major oil companies told PNA that Houston-based Shell Exploration and Production Co. Inc. had contacted them, offering to sell its 10 North Slope leases. They were told that Alaska did not stack up as an investment against the deepwater Gulf of Mexico.
Shell did not comment at the time, but on Dec. 12 company spokesman Fred Palmer told PNA that since re-entering Alaska, Shell has considered “several exploration scenarios,” including “partnering arrangements” — and the sale of its leases, which the company acquired in the state’s Oct. 24, 2001, North Slope areawide lease sale. Palmer said the leases were not currently for sale and no “active discussions are taking place at this time” with potential partners or buyers.
He also said, “While we recognize the state’s oil and gas development does offer great potential, at this time Alaska is not a core focus area for Sepco.”
Drilling plans This statement is juxtaposed to what company spokesman Rich Hansen told PNA after the 2001 lease sale. He said Shell intended to be a “major player” on the North Slope.
“This is the first time we bid on Alaska properties in some time. The world has changed considerably since we sold our holdings up there,” Hansen said, referring to the company’s sale of its Beaufort Sea and Cook Inlet holdings in the mid-1990s. “Those holdings weren’t strategic to long-term growth at the time. Some were mature assets and that’s not where we want to be. Shell is committed to growth in North America. Alaska looks very promising. … We’re very interested in establishing a presence on the North Slope.”
Hansen also said Shell was in acquisition mode in Alaska.
But the company has made no public acquisitions since it picked up the 10 central North Slope tracts, despite speculation that it was looking at a major acquisition of BP Exploration (Alaska) Inc.’s slope assets in exchange for some of Shell’s deepwater Gulf of Mexico holdings.
So how does its new position on Alaska change Shell’s plans to “get down to serious drilling” in the winter of 2003-2004, which Hansen said after the 2001 lease sale?
“We have no plans in this regard at this time,” Palmer told PNA Dec. 16.
Shell holds onto leases But Palmer was emphatic that Shell was not selling its North Slope leases, even if selling had been under consideration at some point in the last year.
“We are going to continue to monitor activities and developments in the state and look for opportunities that meet our investment criteria,” he said.
So what are Shell’s investment criteria?
Palmer didn’t elaborate, but in 1997, Hansen said the main reason Shell was pulling out of Alaska after almost 35 years was because, “Shell has such a small position, land holdings, in Alaska. It’s not strategic to take a small position a zillion miles from Houston and develop it. You need a critical mass to make it strategic; you need potential for growth and expansion.”
Traditionally, Shell moves into an oil and gas province in a big way or not at all. The $2.4 million the company paid for its 56,000-plus acres south of the Kuparuk River unit is a minor monetary investment and a small land position for this energy giant, one of the largest oil companies in the world.
To date, Shell has shown no apparent interest in two areas of the North Slope where large blocks of land have recently been available — the gas-prone Brooks Range Foothills and the National Petroleum Reserve-Alaska.
Looking for elephants? A former senior official with the Alaska Division of Oil and Gas said Shell, like BP, is interested in areas with “elephant” fields — i.e. a billion barrels of oil plus.
Shell has expressed recent interest in one of two areas in Alaska expected to contain elephant oil fields — the coastal plain of the Arctic National Wildlife Refuge.
Last year, the president of Shell Exploration, Raoul Restucci, said the company would be “eager” to explore ANWR’s coastal plain if it was opened for drilling. The area is expected to contain as much as 16 billion barrels of recoverable oil.
The other region expected to contain elephant size oil reserves is the Chukchi Sea. Shell, which discovered the Beaufort Sea’s Northstar and Liberty fields, drilled four exploration wells in the Chukchi between 1989 and 1991. (See page 1 article about the Chukchi.) The Chukchi’s unproven recoverable reserves have been pegged at as much as 15.5 billion barrels.
Palmer did not say whether or not Shell was interested in the Chukchi Sea. In 2001, Hansen said the company was looking for oil onshore only, but indicated that could change.
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