If If there was a good chance that production might begin from the federal waters of the outer continental shelf off northern Alaska by 2020 or even 2021, the Arctic OCS would have front and center stage in this magazine because it’s the only area open to oil exploration and development on or offshore Alaska where there might be another super-giant oil field like Prudhoe Bay. (The U.S. Geological Survey’s mean estimate of undiscovered technically recoverable resources in the Chukchi and Beaufort seas off Alaska is 30 billion barrels of oil equivalent.)
The kind of money thrown down in the federal Arctic Alaska OCS lease sale in 2008 speaks to the potential of the region. Sale 193 drew a record $2.7 billion in high bids, a total of all bids was $3.4 billion, from six bidders, five of them major international oil companies:
• Shell spent $2.1 billion in high bids for 275 blocks.
• ConocoPhillips had high bids of $506.4 million for 98 tracts.
• Repsol had high bids of $14.4 million on 93 tracts.
• Statoil had $14 million in high bids on 16 tracts.
• Eni Petroleum, which in 2011 started producing oil from its nearshore Beaufort Nikaitchuq oil field, had high bids of $9.3 million on 18 tracts.
But even Shell, the lead company in this generation’s efforts to explore the federal waters off northern Alaska, said in late 2011 that if everything goes right from now on, and there are no more permitting and lawsuit-related delays, it does not expect to be producing oil for 10 years in Alaska’s OCS.
What are the odds of everything going right?
Approaching $4 billion in expenses
Having purchased a substantial number of Beaufort Sea OCS leases, Shell first planned to drill there in 2007, targeting its Sivulliq prospect on the western side of Camden Bay. But in the face of appeals against the approval of various permits that Shell needed before starting drilling, the company’s Beaufort drilling plans have repeatedly been postponed and modified.
Shell has faced similar difficulties in the Chukchi Sea, a remote region with world class hydrocarbon potential which the company has said is its top priority in Alaska. Of the $2.1 billion Shell spent in the 2008 federal lease sale, $1.5 billion went for leases on just one prospect, the Chukchi’s Burger prospect, a structure 25 miles in diameter, known to contain a major pool of natural gas and lying about 80 miles offshore the western end of the North Slope.
A well drilled by Shell into the Burger structure in an earlier phase of Chukchi Sea exploration, around 1990, discovered the gas pool, but Shell also thinks there is oil at Burger, based on evidence such as oil staining found in rock samples from the old Burger well and pressures in the lower part of the Burger structure.
Pete Slaiby, Shell’s vice president in Alaska, said in September that seismic data gathered from Burger by both Shell and
ConocoPhillips prior to the 2008 lease sale had clearly generated enthusiasm for the prospect, given the high bonus bids the companies had offered for Burger leases.
“We truly believe this (prospect) is a game changer,” he said.
Shell also sees the Beaufort Sea OCS as having major potential for oil and gas. In addition to its Camden Bay leases, the company owns federal leases in Harrison Bay, on the northwest side of the central North Slope, where it is rumored to also be taking an interest in state leases (see On Deadline section on page 8).
“There’s the potential for years of production (in the Beaufort Sea) at Gulf of Mexico deepwater kinds of flow rates,” Slaiby said.
Slaiby told Petroleum News that Shell has also been evaluating potential pipeline routes across the National Petroleum Reserve-Alaska for the transportation of future Chukchi Sea oil east to the trans-Alaska oil pipeline.
Norwegian oil major Statoil, a partner with Eni on most of its Alaska OCS leases, is working on plans for Chukchi Sea exploration, determining the resources it needs and deciding on the timing of any exploration drilling, Lars Sunde, the head of Statoil’s Anchorage office, told Petroleum News Sept. 7. The company now has the final results from the 3-D seismic survey that it carried out in its leases in the fall of 2010 and is assessing the results, anticipating a drilling decision by the middle of 2012. Meantime, Statoil has started work on permitting for eventual drilling, Sunde said.
The company has identified two to three prospects from the seismic and is assessing those in detail, having already named two of them Augustine and Amundsen. The prospects lie about 100 miles offshore, with the village of Wainwright being the closest point on the Chukchi Sea coast.
ConocoPhillips dropped most of its Beaufort leases in 2009, and is now focused on the Chukchi Sea, where it holds an interest in two prospects — some leases at the edge of Burger, and Devil’s Paw, where Statoil is a 25 percent partner on 50 leases in the prospect.
In a January 2011 conference call, ConocoPhillips CFO Jeff Sheets said, “In the Chukchi Sea, we entered into an agreement to farm down 10 percent of our working interest.”
That partner was China’s Sinopec.
Make that six major international oil companies.
