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Shell Exploration puts North Slope leases up for sale
Kay Cashman, PNA publisher
Just one year after Shell Exploration and Production Inc. re-entered Alaska with a $2.4 million purchase of 10 North Slope leases, it has pulled the plug and put those leases up for sale. Shell Exploration is the U.S. E&P arm of the Royal Dutch Shell Group of Companies.
Land and exploration staff from three oil companies told PNA in late October that they had received letters and phone calls from Shell saying the leases it had purchased in the state’s Oct. 24, 2001, North Slope areawide lease sale were on the market.
Alaska not competitive with Gulf of Mexico The reason, they said, was because Alaska didn’t “stack up against Shell’s deepwater Gulf of Mexico holdings as an investment.”
The company’s North Slope tracts are south of the Kuparuk River unit and north of the Brooks Range Foothills.
Landmen said the most interesting lease is tract 109 on which Shell bid $297 an acre for a total bid of $1,710,720 — the highest bid per acre at the sale.
Shell, which had a piddling 320-acre state lease position prior to Oct. 24, 2001, exited Alaska completely in 1999 when it sold the last of its major assets, the Middle Ground Shoal field in Cook Inlet.
Traditionally, Shell moves into an oil and gas province in a big way or not at all. A $2.4 million investment is a small investment for the energy giant, the largest oil producer in the world.
In 1997, Rich Hansen, then public affairs manager for Shell Exploration, told PNA that 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.”
ANWR or BP assets? In the Nov. 25, 2001 edition of PNA, Scott Mitchell, an Alaska analyst from the Edinburgh, Scotland-based oil and gas consultancy Wood Mackenzie, said he believed the possibility of an opening of the coastal plain of the Arctic National Wildlife Refuge is what attracted Shell to the state again.
The company wants a position in the state in order to get into ANWR when and if it opens, he said: “Shell sees ANWR as a longer-term growth potential.”
Raoul Restucci, president of Shell Exploration, made clear in the fall of 2001 that the company would be eager to explore ANWR if it is opened for drilling.
About the same time, a reliable PNA source said Shell was negotiating with BP for the purchase of its Alaska assets, including BP’s ownership in Prudhoe Bay. This past summer, the same source said the deal – which was supposedly a swap for some of Shell’s deepwater Gulf of Mexico assets – had fallen apart.
Both BP and Shell refused to comment on what they referred to as a “rumor.” BP officials said the company was committed to staying in Alaska and Mitchell thought it highly unlike BP would consider selling any of its producing assets in Alaska.
Whether the riches of ANWR or BP’s assets persuaded Shell to return to Alaska, albeit briefly, remains speculation.
A source at Shell says the company is still interested in Alaska but is definitely interested in larger blocks of acreage that would justify standalone facilities.
So far, the National Petroleum Reserve-Alaska and the gas-prone Brooks Range foothills have not piqued Shell’s interest.
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