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The Edmonton Journal: Royal Dutch goes deep in Alaska waters: Higher crude prices make field viable

Joe Carroll, Bloomberg
Published: Thursday, January 25, 2007

Royal Dutch Shell plans to expand its search for oil by drilling the deepest offshore Alaskan well ever.

Shell, which abandoned U.S. Arctic exploration 21 years ago, plans to drill one well to 14,000 feet beneath the sea floor (4,267 metres), which would exceed the deepest well ever drilled in Alaskan waters by 3,000 feet. Two additional wells will be 7,000 feet deep.

Shell is refurbishing two floating drill rigs, one in Canada and one in Singapore, which will be moved to the Beaufort Sea 90 miles northeast of Prudhoe Bay. Drilling is expected to begin in 110 feet of water on Aug. 1, said Keith Craik, the Shell drilling engineer leading the project.

“Shell is pretty high on the Arctic,” Craik said in a interview in Inuvik, Northwest Territories. “It’s a really healthy place to look for hydrocarbons.”

The Hague-based Shell began converting a mothballed drill ship, the Kulluk, in June 2006 in the Arctic Ocean off Canada. The conversion, halted for winter, will be finished in July, Craik said.

The Kulluk, operated by Frontier Drilling, will move to Alaskan waters, accompanied by a second rig also renovated to navigate ice-choked seas. Two ice-breakers and two supply vessels will also be on site.

If Shell finds oil off the Alaskan coast, the company would seek permission to build a pipeline from the wells to the existing Trans-Alaska pipeline terminal, said Craik, who is based in Houston. Shell found oil in the same part of the Beaufort Sea in 1986.

The company abandoned those discoveries because oil prices plunged to near $16 a barrel, making it unprofitable to extract those reserves. Crude is currently trading near $55 a barrel.

Arco, now part of BP Plc, drilled to 11,000 feet beneath the sea floor off the Alaskan coast in 1993, the deepest ever in those waters.

Exxon Mobil Corp., the world’s biggest oil company, and other producers have discovered more than 10 billion barrels of oil in North American Arctic seas. Those reserves remain locked beneath the sea floor because of a lack of pipeline capacity to ship them to markets, said Robert Hunt, president of Calgary-based Horizon North Logistics Inc.

Shell will build an ice road across McKinley Bay in March to haul supplies and gear to the Kulluk, which has been iced in since November. Shell plans to return the vessel to McKinley Bay each November to protect it from more dangerous ice floes in the open seas.

Craik was in Inuvik to brief Inuvialuit hunters and trappers who could be affected by the work on the Kulluk. The Inuvialuit inhabit McKinley Bay, 300 kilometres north of the Arctic Circle.

“We’re going to send in the ice breakers in June to bust out a channel so the Kulluk can be moved out,” Craik said. “We have an ambitious scope of work, but we’re very optimistic.”

Shell plans to drill for at least three years and will extend that if the discoveries are big enough to warrant it. The wells drilled in 1986 indicated the presence of large pools of oil. Those wells terminated at a depth of about 6,000 feet.

© The Edmonton Journal 2007

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