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Shell still hopes to drill this year


Rena Delbridge

Mar 31, 2010

Royal Dutch Shell, which has spent several billion dollars trying to advance its offshore oil program off Alaska’s northern coast, heralded a decision by President Obama to allow exploration and drilling to continue.

The decision takes Bristol Bay leases off the table and may not lead to additional Arctic leases. But the decision does allow development of existing leases, including Shell’s in the Beaufort and Chukchi seas.

Federal waters off Alaska’s northern shores hold an estimated 25 billion barrels of oil and 120 trillion cubic feet of natural gas. Offshore oil development in federal waters is important to Alaska and generally seen as a solution to declining oil production from aging North Slope fields, like Prudhoe Bay. Without new oil production, the 800-mile trans-Alaska pipeline could reach a point in the next decade where flow is too low to continue operations, cutting off North Slope development and, in turn, the source of some 90 percent of state revenue.

Shell Alaska has spent several billion dollars on leases, icebreakers and more, all aimed toward firming up oil and gas estimates and leading to production. Vice president Pete Slaiby has said the company has spent $40 million alone to keep a 2010 exploration season in play, pending permitting and resolution of several legal challenges.

A statement issued Wednesday by Shell Alaska spokesman Curtis Smith indicates the company still plans to drill in 2010, pending air-quality permits from the Environmental Protection Agency. Here’s Smith’s full statement:

As many of you recall, in April of 2009, the D.C. Court of Appeals found a single specific analytical defect in the 2007-2012 OCS Leasing Program under which Shell purchased 275 lease blocks in the Chukchi Sea. As a result of the ruling, the Court required the Department of Interior (DOI) to conduct a more complete environmental sensitivity analysis to determine whether certain areas should be excluded from the 5-Year OCS Leasing Plan.

On March 31, 2010, Department of Interior Secretary Ken Salazar completed the work required by the D.C. Court of Appeals and published a revised Proposed 2007-2012 OCS Leasing Program that continues to include the Chukchi Sea leases Shell purchased in 2008 for over $2.1 Billion. The revised Proposed Program will now be published for a 30-day public comment period after which the Secretary will take public comments into consideration and then publish the revised Final Program.

Shell appreciates the work by Secretary Salazar and the MMS to complete this process, which combined with the conditional approval of our Chukchi Plan of Exploration, means we can continue to plan for success in the Alaska offshore and eventually bring much-needed U.S. production on-line. That timeline starts after we drill our first well.

Today’s announcement by President Obama and Secretary Salazar acknowledges that responsible oil and gas exploration can take place in the Arctic. It also highlights the need for Shell to secure final air discharge permits from EPA Region 10. The issuance of draft Chukchi and Beaufort air permits earlier this year started a timeline of events that will ultimately dictate Shell’s drilling plans for 2010. As of today, we are still planning to drill in 2010 and remain optimistic that our final Chukchi and Beaufort Sea air permits will be issued soon.

For our part, we have been shovel-ready since 2007. Shell has already completed three years of successful seismic acquisition in the Chukchi and Beaufort Seas – areas that could be home to some of the most prolific, undiscovered hydrocarbon basins in the US. We believe the oil and gas reserves in the Alaska offshore could play a major role in reducing our dependence on foreign oil, increase the tax base, provide thousands of jobs for Alaskans and help extend the life of the Trans-Alaska Pipeline.

Finally, while we respect the Secretary’s decision to remove the North Aleutian Basin from future lease sales, we remain confident that we have the experience and technology needed to operate safely and responsibly in sensitive offshore theaters throughout the world – including the North Aleutian Basin. We are disappointed for Alaskans closest to the region who have worked tirelessly over the last several years to make OCS exploration a reality in southwest Alaska.


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