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How rapidly is Shell Oil’s window of opportunity in the Arctic shrinking?

Alex DeMarban | Jul 21, 2012

As predictable as bears roaming and salmon migrating comes the return of another seasonal fact of life in Alaska: Shell Oil waiting for the chance to drill exploratory wells in the Arctic Ocean.

The pioneering oil giant’s quest to open an industrial frontier in the waters off Alaska’s coast has made it no stranger to delay, and this year is no different.

Shell moved ships to Alaska the summer of 2010, but a federal drilling moratorium in the wake of BP’s Gulf of Mexico spill quashed plans that season. In 2011, the Environmental Protection Agency still hadn’t granted Shell the air permits it needed, canceling another round of seasonal activity.

Fast forward to 2012. A series of surprises have severely diminished the company’s drilling window for its prospects in the Beaufort and Chukchi seas, irking Alaskans who had hoped drilling would be underway now that summer is halfway over.

“Seven years and not a single well’s been drilled. It’s extremely frustrating,” said Rick Rogers, executive director with the pro-industry group Resource Development Council.

Who knows what surprises lurk as Shell awaits favorable conditions in the challenging regulatory and Arctic environments.

Isaac Nukapigak, treasurer for the Alaska Eskimo Whaling Commission, flew home to the North Slope village of Nuiqsut on Thursday. Shell’s Beaufort Sea prospect, Sivuliiq, is about 35 miles east of Cross Island, where Nukapigak’s river-bound village sets up a base camp each fall for whaling.

Nukapigak seemed stunned by ice conditions that will be great for whaling because it will calm the waters for whaling crews in boats. But unusually thick and solid pack ice that starts about 10 miles offshore, past a thin section of open water, might continue to keep Shell out.

“It’s going to be a tough, difficult year for Shell to even get their exploration going,” he said.

Hurry up and wait

It was in 2005 that Shell began snatching up federal leases with the hope of punching into undersea oil deposits that company engineers have said could equal vast reservoirs in the Middle East. But getting that oil flowing is no easy feat.

Off Alaska’s coast, savage winters choke waters with sea ice that strengthens each year it survives a summer. And Bowhead whale hunting will further crimp schedules in the Beaufort, as Shell fulfills commitments to local whalers not to drill during the subsistence hunt that usually starts in September.

Even under ideal conditions, US regulators have said drilling can’t start until July, leaving the company no more than four months to do its work before ice sets in. But this summer, circumstances have hardly been ideal.

Shell had hoped to drill a total of up to five wells this season — three in the Chukchi Sea and two in the Beaufort. But its drilling fleet of more than 20 ships still sits Unalaska, the staging area that’s more than 1,200 miles away from Shell’s closest Alaska offshore prospect.

The distance the fleet must travel is longer than the U.S. West Coast. Just getting the ships into place will take a week or more. The fleet required two weeks to sail to Seattle in part because one drill rig, the circular Kulluk, must be towed and moves at just a few knots an hour.

Shell has already said it’s pushing back plans to start drilling until at least August. That would give it time to drill only two wells in the Chukchi, not three as originally hoped. Considering Alaska’s fickle weather and other potential surprises, that might be looking on the bright side.

SOURCE

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