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FIRE AND ICE: Shell and BP’s hunt for offshore oil in Alaska

“An ugly and growing oil leak associated with the explosion and sinking of the Deepwater Horizon oil drilling rig in the Gulf of Mexico last week has raised questions… providing new leverage to environmentalists and North Slope residents…”

Alaska Dispatch

Craig Medred and Jill Burke

Apr 28, 2010

Since the Arctic whaling days of the 1850s, profits on oil from Alaska’s north have fattened the wallets of the global merchant class. The source of the oil changed with the times, but it has continued to flow to the benefit of both commerce and government.

arctic-drill-intro-2

Photos by U.S. Coast Guard and Stephen Nowers
Coming Friday: How do you clean up oil in sea ice?

The crude that replaced whale oil set the stage for a boom that ran, with some ups and downs, from the mid-1970s into the 21st century. Oil production on the North Slope peaked in 1988, with about 2 million barrels a day. That boom is fading now, the volume of oil running through the trans-Alaska oil pipeline falling to about 675,000 per day. And yet many believe there are vast new oil riches waiting just offshore beneath the waters once roamed by the Nantucket whalers — if companies are allowed access, and if they can find a way to get the oil out without harming the environment.

An ugly and growing oil leak associated with the explosion and sinking of the Deepwater Horizon oil drilling rig in the Gulf of Mexico last week has raised questions about the latter while providing new leverage to environmentalists and North Slope residents who’ve long tried to block the former.

Opponents of offshore drilling in the Arctic say it is not worth the risk. But the Minerals Management Service, which regulates offshore oil development in federal waters, believes the potential rewards cannot be ignored. MMS estimates oil fields buried beneath the seabed off Alaska’s northern and northwest coasts could hold 27 billion barrels of crude — more than Prudhoe Bay when it was discovered. About 12 to 15 billion barrels is believed to be in the Chukchi Sea, 350 miles west of oil development now clustered around the Sagavanirktok River delta near Prudhoe Bay.

Alaska political leaders say the oil needs to be developed if Alaska is to survive. Crude does more than just grease the gears of the Alaska economy; it is the gears, funding up to 90 percent of the state’s budget through taxes, royalties and fees.

Before the Deepwater Horizon accident, there was growing optimism about new oil development in Alaska. Both the Chukchi and the waters off the mouth of the Sag are expected to see significant new oil activity in the coming months. But by Wednesday afternoon, five days after the Deepwater Horizon erupted in flames, the incident was among the topics of discussion at an afternoon meeting with the State of Alaska about Shell’s 2010 exploration plans for the Chukchi Sea, said Joe Balash, a special assistant to Gov. Sean Parnell.

“There is nothing like what happened last week to cause you to want to double check on things,” Balash said on his way to the meeting.

Specifically, he said, the state wanted more information about the individual drilling locations, how the Alaska operations are similar or dissimilar to those in the Gulf of Mexico, and what cleanup vessels and equipment will be standing by, ready to go on a moment’s notice in the event of a problem as oil development heats up in the Arctic.

BP — the world’s third-largest privately held oil company and the operator of the Deepwater Horizon — plans this summer to snake a drill bit from an island off the coast of Prudhoe and under the seabed to tap an offshore prospect known as Liberty. Royal Dutch Shell Oil — the world’s largest privately held oil company — holds permits to probe offshore in the Chukchi this summer.

Like the whalers who came before them, today’s oil merchants face challenges and, at times, danger in their quest for energy riches. Their predecessors were saddled with extreme weather, potential malnutrition, rough seas and thrashing leviathans. BP and Shell must stare down federal regulations, logistical difficulties, opposition from environmental and cultural advocates, massive expenses, political hurdles — and the very real possibility their efforts could end in disaster.

Record-breaking distance, billion-dollar overhead

BP officials say Liberty will boost oil production in Alaska’s oil patch and help offset the declining flow in the 800-mile trans-Alaska oil pipeline. The company estimates it will spend more than $1 billion to tap a 100-million barrel reservoir beneath federal waters in the Beaufort Sea. BP’s newest offshore venture is expected to break long-distance drilling records and yield up to 40,000 barrels of oil a day by 2013.

httpv://www.youtube.com/watch?v=mtu4M2xLnBA&feature=player_embedded

Company executives are vocal in their belief that projects like Liberty have a role in liberating America from foreign influences. Energy security is national security, the argument goes, and it is beneath the waters of the nation’s outer continental shelf that BP and other oil companies see the greatest potential for new domestic oil and gas resources.

Liberty is a hybrid operation, a high-tech endeavor spanning land and sea, state and federal terrain. Unlike the Deepwater Horizon operation, Liberty’s drill tower will sit atop a gravel island, not a semi-submersible floating platform. From an existing manmade island inside state borders it will employ extended-reach drilling to bore two miles beneath the Beaufort Sea, then stretch outward another six to eight miles to reach a rock-trapped field buried deep in the seabed under federal waters.

The first drilling will begin in fall. Over the course of several months, wells will be carved in sections. For each, steel casings are installed and cemented in place. Tubing will then be used to feed the oil and gas from the buried reservoir to processing facilities. “Using this design, oil and gas are fully contained and controlled inside the well,” according to a BP brochure on Liberty. Production is expected to begin in 2011.

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