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Bloomberg: Shell to Resume Arctic Drilling After Two Decades (Update1)

By Jim Efstathiou Jr.

Royal Dutch Shell Plc, having abandoned U.S. arctic exploration 21 years ago, may be drilling new oil and gas wells in the region as soon as this summer, the head of the company’s U.S. unit said.

“Hopefully, if all goes well, we’ll have dropped rigs there this summer,” John Hofmeister, Shell’s top U.S. executive, said today in an interview in Houston. “We shot seismic in the Beaufort Sea last summer,” he said, referring to the sound wave imaging used to guide oil and gas exploration.

Shell, the world’s second-biggest oil company by market value, plans to expand its search for oil by drilling the deepest offshore Alaskan well ever. Shell plans to drill one well to 14,000 feet (4,267 meters) beneath the sea floor, exceeding the Alaska offshore record by 3,000 feet. Two additional wells will be 7,000 feet deep.

Hofmeister said he was pleased by President George W. Bush’s decision last month to allow drilling in Alaska’s Bristol Bay and in an area in the Gulf of Mexico more than 125 miles from the coast of Florida. The decision allows the U.S. Interior Department to offer leases in 5.6 million acres of Bristol Bay.

“We think the geology looks very promising,” Hofmeister said.

Threat of Spill

Bristol Bay was placed off limits by President Bill Clinton in 1998. Environmental groups oppose drilling there because of the impact of a spill on the bay’s salmon population. U.S. House Speaker Nancy Pelosi, a Democrat from California, said an oil spill in Bristol Bay would “devastate” commercial fishing interests, American Indian communities and tourism.

A predecessor to 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.

The U.S. Congress last year agreed to allow oil and gas drilling in a region of the Eastern Gulf of Mexico placed off limits by Bush in 2001. Hofmeister characterized the move as an overdue first step.

“That’s a small amount of access, ladies and gentlemen, and it took 25 years for that to occur,” Hofmeister said in a speech today at the Cambridge Energy Research Associates conference in Houston. “We need more access. We need it now.”

To contact the reporter on this story: Jim Efstathiou Jr. in Washington at [email protected] .

Last Updated: February 13, 2007 11:57 EST

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