Article by a former employee of Shell Oil USA

UPDATED WITH COMMENTS AND MORE INFORMATION

December 4, 2010

I would like to point out that Shell Oil USA (and other operators) safely drilled a number of exploratory wells in the Arctic waters of offshore Alaska in the late 1980′s and early 1990′s without mishap. These wells were drilled in areas Shell now wants to drill. In some cases, these new wells will be delineation wells for discoveries already made by Shell and others.
 
However, RD Shell’s contentions that they are drilling in shallow water, not mile deep water, and that drilling is therefore much safer, ring hollow given Shell’s past and ongoing record in the shallow Gulf of Mexico, and even onshore. If water depth was the critical criteria Shell’s shallow water and onshore drilling operations worldwide should be ‘defect free’. They are far from that. Safety issues continue even onshore. And we only need to recall the Bay Marchand blowout in 1970 in very shallow Gulf of Mexico waters to understand that water depth is no guarantee of either safe drilling or production. That blowout was due in large part to an effort by Shell USA to develop that field as cheaply and quickly as possible.
 
However, given all the scrutiny that has fallen upon the oil industry for its slipshod ‘safety culture’ (if any real ‘safety culture’ actually exists) since the BP disaster, Shell and their partners could most probably be trusted to safely drill their desired exploration wells in both the Chukchi and Beaufort Seas.
 
Actually, the US government is legally obligated to let Shell and its partners drill at some point in time. If just cause is found that would prohibit that exploratory drilling, then Shell, et al, should be refunded their lease payments, with interest. The government must act in good faith in this regard.
 
Clearly, any mishap/screw-up by RD Shell or others that caused any sort of ‘significant’ release of hydrocarbons into the fragile Arctic environment would doom any further drilling in those regions for decades to come. RD Shell along with the rest of the industry are well aware of that reality. In fact, drilling in the Alaskan Arctic must be a ‘mishap free’ affair, for there will now be no tolerance for ‘typical’ industry conduct after the BP Affair.
 
Exploratory drilling is a very short term endeavor. The bigger concern, and one that has yet to be adequately addressed, is how to exploit any significant reserves that may be discovered without serious risk and damage to the very fragile Arctic environment. That is by far the more serious and more problematic issue the government, RD Shell and the oil industry face. RD Shell and the oil industry have yet to demonstrate they can meet the technical challenges and operate safely.
 
One need only look at how BP and their partners (Exxon, et al) have operated on the North Slope and have maintained the Alaska pipeline over the years to see where the industry has placed and continues to place its priorities. And we only need to look to the Russian Arctic to see what the consequences of serious releases of hydrocarbons will be. That is not a matter of speculation. And Shell USA’s past operational record in Alaska, RD Shell’s environmental record in the Arctic in Russia are indicative of the company’s attitude toward environmentally safe operations in the Arctic. Shell USA had diesel fuel spill issues associated with the improper abandonment of discovery wells (induced by improper internal ‘reserve bookings’ issues) at a prospect called Seal Island (now renamed Northstar by BP I believe). And recently the Russian government took harsh action against Shell as a consequence of environmental issues at Sakhalin II. How RD Shell operates and has operated in the Alaskan and Russian Arctic are very relevant because this conduct is indicative of Shell’s corporate attitude regarding environmental issues. And this is senior level management’s attitude. After all, they lead that company.
 
While Shell and others may indeed be allowed to drill exploratory wells, there is absolutely no guarantee that they will be allowed to develop any reserves that may be discovered. Any such effort will ultimately end up in US courts and face legal challenge after legal challenge. I question whether they would ever be allowed to exploit those discoveries at anytime in the near future. It could take decades, literally, for the resulting political and legal challenges to be overcome.
 
Given the continuing development of massive gas reserves in the lower 48 States, and the rather limited potential for oil in the Alaskan Arctic offshore, estimated to be around 20 billon bbls, I don’t see any real imperative to develop those known gas and oil reserves given the potential ecological damage that could occur from slipshod industry operating practices. These oil reserves are spit in the bucket compared to the exploitable onshore oil sand reserves in Alberta and Venezuela. And there are serious environmental damage issues associated with the development of those reserves as well.
 
To further exacerbate the problem of drilling in the Alaskan Arctic is the fact that the US government has no agency capable of regulating the oil industry effectively. The Dept. of the Interior has been and is completely compromised by the coziness between the oil industry, politicians, and senior bureaucratic leadership. A great example of this completely improper relationship is the Gale Norton affair, and the other associated ‘sex and drug’ scandals that rocked MMS in recent years. DoI operates more like the corrupt bureaucracy of a third world country than they do of a modern democracy based upon the rule of law. And Shell has had a big hand in the deliberate corruption of that bureaucracy.
 
The modern US Republican party was born in large part in Harris County, Texas, home to Houston, Texas, the one-time capital of the world wide oil industry and still the capital of the US and North American/South American oil industries. The coziness between the oil industry and the modern Republican party is legendary. However, large sums of oil industry money flow to both political parties and to lobby organizations who effectively gut the regulatory power of governmental agencies and prevent the establishment of an effective regulatory agency.
 
Until the impotence of the US government to effectively regulate the oil industry is remedied, I see no possibility of development of hydrocarbon reserves in the Alaskan offshore, regardless of how much oil and gas may be discovered. The arrogance and corrupting influence peddling of the large major oil companies, which ultimately led to/contributed to BP’s latest offshore disaster have doomed that possibility.

RELATED ARTICLE

Murphy’s Law and Shell drilling in the Arctic Ocean

COMMENTS

From: jmm@thelastalaskanbarrel.com

Sent: Saturday, December 04, 2010 4:41 AM

To: john@shellnews.net

Subject: The Last Alaskan Barrel  

John: Saw your recent news post about arctic issues re Shell.

I want to inform you about a book I recently published: The Last Alaskan Barrel: An Arctic Oil Bonanza that Never Was. It is a case study of the profitablility of the first 50 years of Arctic Alaskan oil and gas development. My website is www.thelastalaskanbarrel.com. There are links to a bio, radio interview, speaking engagements, as well as Amazon where the book is available.  The book also takes a glimpse at future arctic OCS development.

Since the risk so far has not been worth the reward based on price, cost, and taxes, I wonder if Shell shareholders understand the OCS risks and lack of reward involved for their investment.

Perhaps you would consider a link to my website on your site.   Please contact me with any questions or comments.  

Regards,

John Miller

Posting by “mastermariner” on Dec 4th, 2010 at 3:16 pm

Petroleum is a way of World life – there needs to be a continuation to explore, discover, drill and bring to market the energy which keeps everything moving ahead… BUT we have seen there are problem areas and as humans mistakes are made, but that does not mean we continue to use old knowledge and policies to manage today’s risks. The Representatives we entrusted to oversight have failed – Alaska thought it best to create a Citizens Advisory Council – I also think we need more oversight to ask critical questions – SHOW US HOW YOU WOULD CLEANUP AN ARCTIC OIL SPILL – if the answers are not plausible then undoubtedly there needs to be more work and technology – we should NOT allow wildcat drilling – by SHOWING US it will provide a basis for real world demonstration, education and public trust which has been lost – DRILL BABY DRILL may be the cry but there is also a SHOW US FIRST drum beating louder and louder – accept the challenge and SHOW US not the Government who serves Political interests ahead of Citizens – GET CITIZENS INVOLVED AS A BETTER WAY TO REGAIN TRUST ! I volunteer to sit on a review group for a year – others would too… TRUST THE AMERICAN PEOPLE – SHOW US!

More info re Citizens Advisory at http://pwsrcac.info/citizen-oversight/

Petroleum News

Alan Bailey: Week of December 5, 2010

On Dec.1 Secretary of the Interior Ken Salazar announced a much-awaited new strategy for oil and gas leasing on the U.S. outer continental shelf, in the wake of the Gulf of Mexico Deepwater Horizon disaster. And the Department of the Interior confirmed that as part of that strategy the Bureau of Ocean Energy Management, Regulation and Enforcement will continue to honor existing oil and gas leases in the Beaufort and Chukchi Seas.“In the Arctic, which is a frontier area where leases have been issued but there is limited development, we will proceed with utmost caution,” Salazar said during a press briefing announcing the new strategy. “The challenges of operating in the Arctic are different than the Gulf of Mexico. In the Arctic, oil and gas resources are under shallow waters, not deep waters, but there are issues we must address about spill response capabilities, environmental sensitivities and operations in often very harsh conditions.”

Shell drilling permit 

In early October Shell, the company that has been spearheading efforts to explore in the Alaska Arctic OCS, submitted to Interior an application to drill a single well in its Sivulliq prospect in the Beaufort Sea. And during the press briefing BOEMRE Director Michael Bromwich said that his agency is still reviewing that application.

“We are reviewing and processing Shell’s application to drill a single exploratory well in the Beaufort Sea,” Bromwich said. “We will move forward with a careful and complete review of Shell’s application to determine if the project meets all existing and new safety standards, has robust oil spill response capabilities in place and can move forward under strong oversight and inspection.”

On Dec. 1 BOEMRE issued a notice, saying that it is preparing a supplemental environmental assessment, with a public comment period ending Dec. 22, for Shell’s Beaufort Sea exploration plan. And, according to a BOEMRE fact sheet, if the agency approves Shell’s drilling, “BOEMRE would have safety personnel on site throughout the drilling operation to monitor the operation and hold them accountable for compliance with BOEMRE’s drilling safety and environmental regulations.”

No timeline

Bromwich declined to commit to any specific timeframe for processing Shell’s application.

“We’re not going to be constrained by any deadlines,” Bromwich said. “We understand that Shell needs a decision and when we complete the review and analysis we will be in a position to make our decision.”

Shell has said that it needs a permit decision by December, to enable sufficient time for mobilizing its drilling operation by the summer of 2011.

“Today’s announcement was a positive one for Alaska and acknowledges that responsible oil and gas exploration can take place in the Arctic,” Shell spokesman Curtis Smith told Petroleum News Dec. 1. “While Shell continues to make plans to drill in 2011, a final decision on our Beaufort Sea drilling permit is needed soon for Shell to continue to pursue 2011 exploration drilling.”

Mayor Edward Itta of the North Slope Borough, the borough that includes the North Slope communities potentially impacted by Shell’s Beaufort Sea drilling, said Dec. 1 that the decision to continue the review of Shell’s drilling application makes sense, given the government’s plan to re-evaluate safety issues and environmental impacts. North Slope communities have expressed strong concerns about the possible impacts of offshore industrial activity on subsistence hunting.

“The plan that’s on the table is closer to something we can live with,” Itta said. “So the process should go forward, but let’s not forget that there are still outstanding issues. Some of Shell’s proposed safety measures — such as their capping system — aren’t yet contained in the permit application. Also, EPA hasn’t granted air quality and water discharge permits, and NOAA’s Incidental Harassment Authorization is still in the works.”

More lease sales? 

Interior also seems to have upheld a commitment made in March to consider the possibility of new Chukchi Sea and Beaufort Sea lease sales within the scope of its next five-year lease sale program, the program spanning the years 2012-17. However, there is a strong caveat around the need for further environmental studies and an analysis of Arctic oil spill response capabilities.

“BOEMRE will soon begin to hold public meetings in Alaska to gather important public input and information for an environmental impact statement that will help inform Secretary Salazar’s decision on whether and where to schedule Alaska lease sales under the 2012-2017 program,” the Interior fact sheet said, “The public meetings will cover the Beaufort, Chukchi, and Cook Inlet planning areas.”

And in the press conference Salazar hinted at a willingness to allow some exploration action in the interim.

“I also recognize that cautious, limited exploratory activities can help develop critical information about the Arctic and its resources,” Salazar said. “Those exploratory activities, however, must be conducted safely and with strong oversight.”

Significant change 

Interior’s Dec. 1 announcement did indicate a significant change in the agency’s strategy for leasing offshore the Lower 48. The agency has decided to prepare a supplemental environmental impact statement for remaining Gulf of Mexico lease sales in the 2007-12 lease sale program, with those lease sales deferred until the SEIS is published. Interior will make every effort to reach a position where it can conduct those lease sales by the end of 2011 and into 2012, Salazar said.

And, having now decided to focus oil and gas development on OCS areas where there are existing leases rather than expanding leasing into new areas, Interior is not considering planning any lease sales in Atlantic regions before 2017, a reversal of the leasing strategy that Interior announced in March. The agency has also decided to cancel a plan to investigate the potential for oil and gas leasing in the eastern Gulf of Mexico, an area currently the subject of a Congressional drilling moratorium.

Sen. Lisa Murkowski, in responding to the Dec. 1 announcement, pressed for the opening of more of the OCS to the oil and gas industry.

“I am pleased and relieved that Alaska’s offshore leases are being honored, but I strongly believe that the Eastern Gulf of Mexico, as well as the Atlantic and Pacific, should be open to exploration,” Murkowski said. “These areas represent some of the most abundant oil and gas resources available for domestic production in the Lower 48. Restricting their development will only further stunt our economic recovery.”

Salazar, however, had made it clear that he wants a more cautious approach to future offshore oil and gas development.

“Taken together, the next steps we are taking in each of the OCS planning areas ensure we are moving forward prudently while also maintaining a careful, responsible path for meeting our nation’s energy needs,” Salazar said.

Source Article 

Royal Dutch Shell is facing “serious” charges for alleged environmental and safety problems connected to a fire at its Bacton gas terminal almost three years ago.

The price of Brent crude oil jumped to more than $100 per barrel when the fire broke out at a water treatment plant at Bacton gas terminal in February 2008

By Rowena Mason 6:50PM GMT 02 Dec 2010

Published: Dec. 2, 2010 at 10:39 AM

LEXINGTON, Mass., Dec. 2 (UPI) — If all things go according to production plans in Iraq, oil production there could outpace Saudi Arabia within roughly seven years, an analyst said.

Supermajors Royal Dutch Shell and Exxon Mobil said they could eventually produce around 2.8 million barrels of oil per day from the West Qurna-1 field in Iraq.

Sameul Ciszuk, a Middle East energy analyst at IHS Global Insight, was quoted by Emirati news agency The National as saying much of Iraq’s quoted potential is based on technology used more than 30 years ago.

He said that with modern technology, both companies were able to determine there were more recoverable resources locked in Iraq than previously thought. The West-Qurna levels are 22 percent higher than earlier estimates, the report adds.

New revisions of estimated reserves in Iraq led the country’s oil minister to say in October that there were around 143 billion barrels of oil in Iraq.

Ciszuk said if all developments go ahead as planned, Iraq could be producing 13 million bpd at some point after 2017, beating Saudi Arabia by 1 million bpd.

© 2010 United Press International, Inc. All Rights Reserved.

UPI SOURCE ARTICLE

“Mr V enjoys a new +22% salary up from 3.2M in ’09 to 4.4M. Now don’t get me wrong, he did an excellent job of getting rid of ~6000 employees and made sure all who followed the rules were also rewarded, whether they drank too much, sexually accosted their underlings, had sex on company property, or perhaps circumvented environmental regulations…”

Posting on Shell Blog by “alwayswary” on Dec 2nd, 2010 at 1:29 am

Deal will give Shell access to Russia’s huge oil and gas reserves

Tuesday 30 November 2010 19.05 GMT

Tim Webb

In 2006, Shell was forced to halve its controlling stake in Sakhalin II and hand control to Gazprom following intense pressure from the Kremlin. Photograph: Newscast/Jess Jones/EPA

Almost four years after Shell was forced to cede control of a $20bn (£12.8bn) gas project to its Russian rival Gazprom, the two companies have signed a new agreement on “global co-operation”.

The pact will make it easier for Shell to access Russia‘s vast oil and gas reserves in Siberia and the far east. In return, state controlled Gazprom will become a partner on as yet unspecified Shell projects outside Russia.

Analysts said that the arrangement would allow Gazprom to reduce its dependence on selling gas via pipeline to Europe – where demand for gas is falling – and help it to tap growing markets such as Asia. Gazprom, which does not currently produce significant quantities of gas outside Russia, will also be able to develop its technical expertise, particularly on projects producing liquified natural gas, which can be shipped around the world by tanker.

Gazprom’s influence – and financial clout – have been weakened recently because of an unexpected global “gas glut” as new techniques make unconventional projects like shale gas and coal bed methane gas viable.

Shell, like most non-state controlled international oil companies, is finding it increasingly hard to access new reserves. More of the world’s oil is now controlled by state-owned companies. In December 2006 Shell was forced to halve its controlling stake in the huge Sakhalin II project in Russia’s far east and hand control to Gazprom following intense pressure from the Kremlin.

Peter Hitchens, analyst from stockbroker Panmure Gordon, said it was “slightly ironic” that the company was forging such a pact with Gazprom given the pair’s history. But he added that the experience demonstrated that foreign companies partnered with Gazprom do better than those operating independently in Russia. The project began production last year and both companies are now discussing the possibility of expanding Sakhalin II so it can export more liquified natural gas.

Shell has also found itself partnered with Gazprom on the Salym oil and gas field in western Siberia. Its original partner, the UK-based Sibir Energy, was taken over by Gazprom last year.

Alexey Miller, chairman of Gazprom’s management committee, said: “This agreement is a vivid example of the mutually beneficial development of strategic partnership between the world’s largest energy companies. Ahead of us, we have new large-scale projects and growing joint presence in new markets.”

Shell’s chief executive, Peter Voser, said: “Russia is an important area for new energy development for Shell and I expect it will play a big role in meeting the world’s growing demand for oil and gas in the years ahead.”

In March, Shell announced a $3.2bn joint takeover with PetroChina to buy Australia’s coal seam gas producer Arrow.

SOURCE

The Telegraph: Gazprom and Shell to develop energy projects together

A new “special relationship” between Royal Dutch Shell and Russian state gas giant Gazprom will see the two companies develop more energy projects together.

Shell has agreed to let Gazprom share some of its projects abroad if it is allowed to help develop the third and fourth stages of the Sakhalin project

By Rowena Mason 8:31PM GMT 30 Nov 2010