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Despite delays, Shell has robust summer program in Arctic

Pete Slaiby, head of Shell’s Alaska operations, says his company has budgeted $130 million for its 2010 work in the Beaufort and Chukchi seas program. This, despite the federal hold on offshore drilling. PHOTO/Michael Dinneen/for the Journal

September 17, 2010

By Tim Bradner
Alaska Journal of Commerce

Despite another holdup in Arctic outer continental shelf exploration drilling, Shell has a substantial summer research program under way in waters off the north Alaska coast, company officials in Anchorage said Sept. 14.

“We have a lot of science work under way, with shallow water hazard studies and our ongoing environmental work. It’s quite a robust program,” said Pete Slaiby, head of Shell’s Alaska operations.

About 400 people are employed in the summer offshore programs in the Beaufort and Chukchi seas and the company had budgeted about $130 million for its 2010 summer work, Slaiby said.

In total, Shell has invested more than $3.5 billion so far in the Alaska Arctic OCS without being given final permission to drill, he said. About $2.2 billion of that was in bids for leases in the Chukchi Sea, off the northwest coast.

On the legal front, Slaiby said he is encouraged over a decision earlier this month by the full 9th Circuit Court of Appeals not to reconsider a decision by a three-judge panel of the court in March that Shell’s exploration permits issued by the U.S. Minerals Management Service (now the Bureau of Ocean Energy Management) were in compliance with the law.

Environmental groups had challenged the permits.

Slaiby said that in May one of the 9th Circuit judges had asked fellow judges on the court to reconsider the March decision in light of the BP well blowout and spill in the U.S. Gulf of Mexico and the federal government’s subsequent decision to delay approvals of drilling permits in deep water and in the Arctic.

The full court’s decision, which came in the first week of September, was to reaffirm the March decision, Slaiby said.

One other new development is that Shell’s shallow hazard survey under way this summer includes work in Harrison Bay, located west of Prudhoe Bay and offshore from the Colville River delta and the producing Alpine oil field.

“On behalf of our partners, Eni and Repsol, we are engaged in shallow water hazard surveys in Harrison Bay,” Slaiby said. Shell is in partnership with the two companies in OCS leases in the area.

Completion of shallow hazard surveys must be done before exploration permits can be filed with the BOEM, Slaiby said.

Shell has put its Beaufort Sea exploration priority on 100 percent Shell leases in the Camden Bay area, east of Prudhoe near the border of the Arctic National Wildlife Refuge, but this is the first indication that Shell believes the Harrison Bay prospects farther west have potential.

“Our immediate priority is still Camden Bay,” Slaiby said.

Both prospect areas of the Beaufort Sea are in shallow waters about 150 feet deep, as is the case at the Chukchi Sea leases that are also on Shell’s priority list if federal government approvals are given.

Shell’s federal exploration plans and air quality permits are approved but are on hold pending further actions by agencies. Interior Secretary Ken Salazar said in early September that approvals on drilling permits by the BOEM will not be given until the agency completes its findings on the Deepwater Horizon accident in the Gulf of Mexico, which is expected later this year.

The U.S. Environmental Protection Agency issued approvals on air quality permits for drilling in both the Beaufort and Chukchi seas, but then withdrew approval when environmental groups filed challenges with the Environmental Appeals Board, an internal EPA review panel.

A hearing on the appeal is set for Oct. 7, and Slaiby said Shell hopes for a final decision on the air permits by the end of the year. If they are issued, permits will be good for several years of drilling in both the Chukchi and Beaufort exploration areas, he said.

In an Anchorage press conference Sept. 3, Salazar would give no estimate on when Shell’s drilling applications might be approved.

Slaiby said Shell must have a decision from the government by the end of December to allow time for mobilization for a 2011 exploration program.

Meanwhile, the company has moved its drillship Kullik to Unalaska, where it is moored in Dutch Harbor. The vessel, formerly in the Canadian Beaufort Sea, was modified by Shell to support the 2007 drilling program, but would now serve as a backup drill ship in case a relief well is needed for Shell’s Arctic exploration, once it begins.

The company will still rely mainly on the Frontier Discoverer for its Beaufort and Chukchi drilling, if approvals are given for 2011.

Tim Bradner can be reached at

[email protected]



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