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Shell to Drill Arctic This Summer

In the first exploratory drilling program in US Arctic waters in two decades, Shell is to start drilling prospects in the Beaufort and Chukchi Seas off northern Alaska this August.
This article appeared in Vol. 9, No. 4 - 2012

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The Kulluk drilling rig leaving Seattle, Washington, towed by Shell’s icebreaking and anchor-handling tug supply vessel Aiviq. Photo courtesy of Shell Alaska Two massive Shell Oil Company drilling rigs left the Seattle docks on June 27 for the long trek to reach Alaska’s Arctic waters. “The Kulluk, a conical Arctic rig that spent more than a decade mothballed in Canada, was the first to leave,” says Curtis Smith, Shell Alaska spokesman. “The Noble Discoverer, a 60s log carrier that was converted for drilling, was close behind.” Shell had been planning up to three exploratory wells on the Burger prospect in the Chukchi Sea, where they discovered oil and gas in 1990. The US Minerals Management Service estimated about 14 Tcf for the structure and the possibility of undiscovered oil below the gas. In addition to the Burger drilling, up to two wells on the Sivilliq prospect in the Beaufort Sea were programmed for this year. Shell paid US$12.2 million for the block over the prospect in the 2005 US Outer Continental Shelf Lease Sale 195.

Obstacles beyond Shell’s control have added more delays to its drilling plans, which have been scaled back to just two total depth wells this season. The drilling rigs and most of the support vessels have made it to Dutch Harbor, located on Unalaska Island in Alaska’s Aleutian Chain, still five to seven days from their Arctic Ocean destinations. A slow sea-ice melt forced a reduction of the drilling program and now the certification of Shell’s containment barge is holding up the final permits to drill. This barge, the Arctic Challenger, is a containment vessel that would be the fourth backstop in a string of contingencies to assist in a major blowout. It will float between the Beaufort and Chukchi Seas and if a spill cannot be contained, the barge is designed to submerge a large dome to capture spilled oil. The oil could then be brought to the surface and pumped into a tanker for removal.

Shell is hoping to start drilling operations by early September, which would give it two months working time before having to vacate for the fall whaling season guaranteed to the native Alaskan Inupiats. “The data from the two wells and having all the necessary permits and support vessels in place will put the company in a very strong position for 2013,” says Smith. “Our goal of drilling ten offshore wells in the Arctic over two years is still intact.”

Investing Years in the Arctic

Shell is not a newcomer to the Alaskan exploration scene dating back nearly 60 years. The company was one of the original Arctic explorers including the North Slope where Prudhoe Bay would be discovered. Shell has long specialized in the offshore, developing fields in Alaska’s Cook Inlet in the 1960s despite the very harsh conditions encountered there. Shell sold its platforms in 1998 – they are still producing today. It has also drilled the majority of the wells in the Beaufort Sea and undertaken four of the five wells drilled in the Chukchi Sea.

Shell re-entered Alaska by purchasing OCS leases in the Beaufort Sea in 2005 and has netted more acreage in subsequent lease sales. It now holds position in 137 Beaufort Sea lease blocks. In the February 2008 Chukchi Sea Lease Sale 193, it bid US$2.1 billion for 275 lease blocks. Since those lease sales, the company has spent over US$4.5 billion on permitting, research, outreach, spill prevention and an exploration plan that exceeds all regulatory requirements.

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