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Shell lays out its Arctic plans

Screen Shot 2015-05-13 at 21.47.32Article by Jennifer A. Dlouhy published May 21, 2015 by The Houston Chronicle

Shell lays out its Arctic plans

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Photo: Jennifer A. Dlouhy/Houston Chronicle

SEATTLE – The executive leading Shell’s Arctic drilling program on Thursday outlined ambitions to drill new wells in the Chukchi Sea this summer, instead of returning to the one the company started three years ago.

Ann Pickard, Shell’s executive vice president of the Arctic, talked in depth to the Chronicle about the planned wells on a visit to the Transocean Polar Pioneer drilling rig.

While cranes heaved pipes, drilling fluids and other supplies onto the rig in the Port of Seattle, more than 1,400 miles away in Anchorage, some 400 people – boat captains, federal regulators and Shell officials – conducted a simulation to test how they would respond to an oil spill in the frigid Chukchi Sea.

Meanwhile, Coast Guard officials inspected the Polar Pioneer and the Noble Discoverer, now docked in Port Everett, Wash., handing Shell and its contractors a list of deficiencies that must be addressed before the vessels can win critical certificates of compliance. Lt. Dana Warr noted it is “not uncommon” for Coast Guard inspectors to find mechanical and procedural discrepancies on mobile drilling units, but he declined to say how many were documented on Shell’s rigs.

Shell Oil Co. still needs seven other government authorizations before it can begin exploratory drilling in U.S. Arctic waters again, continuing a 2012 campaign that left the company with two half-finished wells – one each in the Chukchi and Beaufort seas – along with a beached rig and air pollution violations.

Amid all this activity, Shell is edging closer to resuming the high-stakes, high-cost quest for oil, with company executives hoping to mark a big discovery that would justify the seven years and nearly $7 billion the firm has invested in the effort so far. A big Arctic oil find would boost Shell’s balance sheet and could drive new industrywide interest in the remote region.

Shell’s planned 2015 wells target the southwestern and southeastern edges of Shell’s Burger prospect, which is about 70 miles off the Alaska coastline. By contrast, the well sunk in 2012 is farther to the north and closer to Burger’s center. Wells that Shell drilled in the crest of the same formation in the 1980s and early 1990s found natural gas, but the company later abandoned the area to pursue Gulf of Mexico opportunities amid high development costs.

Pickard said the decision to focus on two new wells was driven partly by new analysis of seismic data mapping the potential oil that could lurk thousands of feet below the surface.

“We’ve done a lot more seismic processing,” Pickard said, noting that Shell is aiming to use its two rigs to bore two to four wells over the brief open-water seasons this summer and next. Looking at a two-rig program with “new, reprocessed data … there were other places we wanted to go.”

The goal is to find oil – specifically, a stash of crude big enough to justify the expense and challenge of extracting it from the remote Arctic.

One of the planned wells aims to prove there’s oil at the site; the second could help show just how much.

“If you want to get to commerciality, you want to do so in the least number of wells. How can I get there in less wells? Burger A is not going to help me get there that much faster,” Pickard said, referring to the well drilled in 2012.

Shell could always return to the Burger A well later, Pickard said.

The company also has adopted a new well design for the sites, with a more resilient wellhead made by Houston’s FMC Technologies that can accommodate more rocking from rigs on the surface, though that movement is less likely now that saddlebag-like structures known as sponsons have been added to the sides of the Discoverer for added stability.

“Why not go in with a design that can handle the kind of movement we saw in the past, even though we expect the Discoverer will have less movement this year?” Pickard said.

Shell could begin moving the Polar Pioneer and Noble Discoverer to Dutch Harbor, Alaska, a 12-day journey away, in mid-June. From there it is a two-week trip to its Chukchi Sea drill sites.

That is contingent on the government authorizations and resolving a dispute over the legality of a lease for Shell to station its vessels at the Port of Seattle. Pickard said the company has “backup plans” for loading gear onto the Polar Pioneer and other ships if it is forced to leave Seattle early. But any change would almost certainly cause some delays.

The port dispute represents a clash of Shell’s Arctic ambitions with the environmental sensibilities of Seattle residents, hundreds of whom took to kayaks in Puget Sound last weekend to protest the company’s plans. Environmentalists argue that Arctic drilling is too risky, because any oil spill could irrevocably damage the fragile ecosystem, putting whales, walruses and other marine life at risk.

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