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Shell gets ready to start Arctic drilling within weeks after Obama go-ahead

Times Online

The Times April 2, 2010

Robin Pagnamenta, Energy Editor

Only hours after President Obama opened up vast tracts of America’s coastline to exploration, Royal Dutch Shell said yesterday that it plans to start drilling for oil in the Arctic Sea, north of Alaska, within weeks.

Marvin Odum, the chief executive of Shell’s North America business, said that Shell was “absolutely ready to drill in terms of infrastructure and manpower” in Alaska and signalled that activity could begin within ten weeks.

“Ideally we would aim to drill two to three wells this summer in the Chukchi and Beaufort seas,” he told The Times, adding that the company wanted to make full use of the three to four months’ ice-free period in the summer.

Mr Odum also said that Shell would bid for new oil and gas leases in the eastern Gulf of Mexico that would become available following President Obama’s decision. In 2008, Shell paid $2 billion for exploration licences in the remote Arctic Sea to the north of Alaska.

Since then, the company has been waiting for government permission to drill and has been embroiled in a legal dispute with environmental groups concerned about the impact on the endangered bowhead whale.

However, Shell said it had received a government permit yesterday allowing it to drill in Chukchi, the sea between northwest Alaska and northeastern Siberia. It is believed to hold 15 billion barrels of oil and 76 trillion cu ft of gas, according to US government figures.

Shell cautioned that an appeal could still be made against the permit within 30 days. The group said it was waiting for a final permit for the Beaufort Sea, which is also thought to be rich in oil.

Mr Odum said that Shell was “absolutely” interested in bidding for new exploration licences in the eastern Gulf of Mexico, which had previously been off-limits. He said: “We have made discoveries right up to the area where leasing had been stopped. We know a lot about that trend and think those discoveries will continue. It’s a very good fit for us.”

He said that the opening of large parts of the American East Coast to oil exploration presented big opportunities but that the impact would be long-term. Years of seismic investigations would be necessary before drilling or production would begin.

Mr Odum was speaking as Shell announced the start-up of its Perdido floating production facility in the Gulf of Mexico, producing 100,000 barrels a day. It is the world’s deepest offshore production platform and stands in water as deep as five Empire State Buildings.

The decision to open up new areas of the American coastline to oil and gas development is part of a calculated political move by the Obama Administration to win Republican support for proposed climate change legislation.

The decision has upset environmental groups, but was welcomed yesterday by other oil companies.

Lamar McKay, the chairman of BP America, said that he was “encouraged” by the decision. “It’s a constructive step. We believe the industry has a strong track record of performance in the Gulf of Mexico and are confident that development can be done elsewhere in the same safe and environmentally sensitive manner while creating needed jobs.”

BP, a major producer in the Gulf of Mexico and a key operator in Alaska’s North Slope, which borders the Chukchi and Beaufort seas, said that it would evaluate opportunities as they arose.

Under Mr Obama’s proposals, oil companies will not be able to drill on the West Coast or New England, but will be able to explore off the Atlantic Coast from Delaware to Florida and 125 miles beyond Florida’s shore in the eastern Gulf of Mexico. The plans also permit development in Alaska, but not in the sensitive Bristol Bay area, which includes Alaska’s richest fishing grounds.

The Gulf of Mexico is thought to contain up to 40 billion barrels of oil and up to 200 trillion cu ft of natural gas, according to the Minerals Management Service. As much as 63 billion barrels of oil and 294 trillion cu ft of natural gas could lie within eight leases in the Arctic and Atlantic oceans set to be awarded between 2012 and 2017.

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