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Alaska central to US energy supplies, Shell’s Odum says

Anchorage Daily News

BEAUFORT: Injunction is delaying hiring and training, he says.

Alaska is central to the question of where the United States will obtain its future energy resources. And that’s critical to the issues of energy security and the need for major new resource development, said Marvin Odum, president of Shell Oil Co.

“The big picture for me is what does Alaska choose to do with that. Do they choose as a state to develop that area?” Odum said. “I see this as the bellwether on where we’re going on the energy challenge.”

Currently, progress on Shell’s planned offshore Alaska exploration drilling lies in the hands of the 9th U.S. Circuit Court of Appeals.

More than a year after the court placed an injunction on Shell’s Beaufort Sea drilling, the court has still not ruled on an appeal by the North Slope Borough, the Alaska Eskimo Whaling Commission and several environmental organizations against the U.S. Minerals Management Service’s approval of Shell’s Beaufort Sea exploration plan. The court heard oral arguments in the case last December.

NO TIME LIMIT

Odum said that there’s no time limit for the court to make a decision.

The court injunction is costing a great deal of money and delaying the drilling. To be properly prepared for a drilling season Shell has to hire hundreds of people and ensure that everyone is properly trained. 

“You have to start spending and developing very early in the year, in anticipation of drilling in the summer. We’ve done that for two years in a row now and have nothing to show for that investment.”

This year Shell canceled the summer drilling in June. The buildup cost money and the cancellation disappointed the people expecting to perform the summer work. So, in 2009 Shell will likely make a go-no go drilling decision much sooner.

“I can’t afford to do that again,” Odum said. “I’ll have to make it much earlier in the year.”

Shell spent $2.1 billion early this year to acquire leases in Chukchi Sea off Alaska’s northwest coast.

INFRASTRUCTURE IN PLACE

Shell still has the Kulluk floating drilling platform available for work in the Beaufort Sea, as well as the company’s oil spill cleanup equipment and the infrastructure for marine mammal monitoring. And, even in the absence of drilling, Shell has conducted some successful offshore operations, including the acquisition of seismic data in the Beaufort and Chukchi Seas.

“The seismic surveys have gone extremely well,” Odum said. “We’re in our third season now of collecting seismic data.”

Seismic surveys use sound waves to find underground rock formations that might contain oil or gas. They are done to identify sites for exploration drilling.

Odum said that the results of the seismic surveying done so far have proved encouraging but that Shell has not yet decided whether to acquire more seismic data next year.

“We’re going to process and review the seismic we’ve just finished collecting … to decide whether we need more. … It could be we have enough,” Odum said.

Odum said Shell has made progress in its dialogue with North Slope communities over potential impacts of the company’s activities on subsistence hunting and concerns about the potential for an offshore oil spill. In the past there have been more than 30 wells drilled in the Beaufort Sea, and four out of the five wells already drilled in the Chukchi Sea were Shell’s, he said.

“We have listened to the whalers and the communities about what impact the earlier drilling has had … what’s been measured and what’s presumed,” Odum said. “I’m very confident that we can get to a workable solution.”

Shell signed a “conflict avoidance agreement” with whalers for each of the last two open-water seasons to define the terms under which drilling would take place. There are periods around the whale hunt when operations would cease, Odum said.

“As a company we could never afford an oil spill in the Arctic,” Odum said. “We just can’t afford to have that happen.”

At the same time, Shell sees support of local communities as critical to the success of its operations.

“If the community really doesn’t want you there, it’s not going to work,” Odum said. “It is important for us just as a company and as a sustainable business to get to the point where we’re aligned with the community on what we’re doing up there.”

SOURCE ARTICLE

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