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Shell’s delayed Arctic oil plans worrisome

Alaska Dispatch | Sep 05, 2012

Norwegian oil company Statoil has watched closely Royal Dutch Shell’s long and costly quest to sink exploratory oil wells in the Arctic waters off the coast of Alaska. And that struggle has Statoil concerned, so much so that company officials say Statoil won’t be exercising its federal leases and drilling in Alaska’s Arctic until at least 2015, according to The Financial Times.
Instead, in the near term Statoil is headed to Canada for offshore oil exploration: “…in the coming months Statoil had plans to drill three wells offshore eastern Canada and nine in the Norwegian Barents Sea, where it has already made discoveries. But it will not be drilling in the Chukchi Sea before 2014,” The Financial Times reported this week.
In Alaska’s Arctic, Shell is on the verge of starting a limited drilling program that will entail sinking a drill bit up to 1,400 feet into the seabed — several thousand feet shy of the oil and gas deposits. Nonetheless, this partial drilling effort signifies a breakthrough for Shell, which has spent more than $4.5 billion and years to get to this point.
Tim Dodson, head of exploration for Statoil, told The Financial Times that the costs — many related to complying with regulations and fighting off lawsuits — that Shell has absorbed to get this far is worrisome. “Some of these regulations can make the costs of exploration prohibitive,” he told the newspaper.
One possible way to reduce the financial risks could be for oil companies to partner on offshore exploration wells in the far north. The Financial Times reports.
“You will see more shared equity on these wells, to spread the risk and limit the cost exposure,” (Dodson) said. He added that Statoil was already discussing this option with other companies that have leases in the northern seas, such as Chevron, ExxonMobil and ConocoPhillips.

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