For Shell, ‘success’ in Alaska’s Chukchi Sea is a moving target

What is ‘success?’

When it comes to Shell’s exploration in Alaska’s Chukchi Sea, success is a moving target, as slippery as the sea ice that stubbornly clogged the Chukchi and Beaufort Seas several weeks longer this year than history would have indicated and Shell would have liked.

Back in September, 2011, Shell Alaska Vice President Peter Slaiby spoke boldly about the company’s multi-year and multi-billion dollar effort.

“We have never felt more confident in our ability to proceed, and we have never felt more confident about our portfolio” of exploration prospects, Slaiby told the Alaska Support Industry Alliance in Anchorage.

“The Burger prospect, our initial target, has the potential for being a world-class, multi-billion barrel discovery,” he said, speaking of the spot in the Chukchi where the company hoped to spud five exploration wells in the short window of time between the sea ice melting and September 24, the date federal regulators set as the final day for drilling this season.

“We see it as a basin-opener, and a game-changer for not only the North Slope and [the Trans Alaska Pipeline System], but also the National Petroleum Reserve-Alaska because a pipeline across NPR-A to TAPS will open up a lot of small fields in the reserve.”

As time went on, Shell’s ambitions melted, in large part because the sea ice wouldn’t.

The company had hoped to start drilling in July, but summer sea ice held on longer than expected, preventing Shell from moving its Noble Discoverer drillship into place. The lingering ice meant the five planned wells were more likely to be three, Shell’s President Marv Odum said in June.

“It’s a little ironic, isn’t it, that this is the year it looks like we’ll finally move forward with the drilling process, and what we find through our analysis is there’s more ice in the Arctic this year than there has been in the last decade,” Odum said during an appearance on the “Platts Energy Week” television show. “That’s just Mother Nature.”

But as the ice disappeared, another problem emerged. Even as Shell’s two drilling vessels left Puget Sound to make the voyage north (the Kulluk heading to the Beaufort Sea for a second exploration program), a barge holding sophisticated well capping equipment was having problems passing inspections. Without that barge in place, the Interior Department was not going to chance allowing Shell to drill into hydrocarbon-bearing zones.

Interior Secretary Ken Salazar, whom environmentalists had said was becoming more of a cheerleader for Shell’s Arctic programming, had some harsh words after flying over the Burger prospect in August.

“It’s not the ice. It is Shell’s delay in completing [inspections] of its response vessel,” Salazar said. “Shell must demonstrate that it can meet regulatory requirements with its oil spill containment system. If it can’t meet them there won’t be a Shell program this year.”

Shell has since been granted limited permission to drill “top holes,” or wells with casing that stop short of any hydrocarbon zones. The company has also asked for an extension of the September 24 deadline, but has yet to hear from regulators on that request. The barge remains in Puget Sound, awaiting clearance.

That has led the company to redefine ‘success’ once again.

Speaking on August 30 in Anchorage, Slaiby said that even if Shell can only drill the so-called “top holes” this year, it will consider the season successful.

“We got a late start because of ice, but we will have demonstrated a lot of things, mainly that we can work safely,” Slaiby said. “All the work we can do on top holes will put wind in our sails for 2013.”

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  1. What We Are Reading at September 5, 2012 12:07 pm

    […] For Shell, ‘success’ in Alaska’s Chukchi Sea is a moving target […]

  2. John Kingston at September 4, 2012 6:00 pm

    Gary, it’s hard to understate just how important this project is to Alaska. The rate of decline on the North Slope is relentless, and what Alaskans see is a race against time: can new supplies get into the TAPS before flows get down to the 350k b/d level, at which the pipeline effectively is inoperable? Production varies widely now, anywhere from 550,000 to 600,000 b/d, though maintenance last month took it to less than 400,000 b/d. But the hope that I heard from Alaskans last year when I moderated the Alaska Oil & Gas Congress is that Beaufort and Chucki Sea drilling would provide new supplies to keep the flow going past tnat 350k b/d “point of no return.”

    • Dovandids at October 24, 2012 10:54 am

      i know we need to be more independent for sniiatusng our own oil and not depend on other countries to supply our needs.i am concerned about the safety of the animals, ocean and the whole environment. alaska is a vast wildnerness and should not be drill is a diseaster waiting to happen. i say NO to the drilling and Mr.President you should also. keep alaska safe and beautiful for our future generations.SAVE OUR ALASKA.NO TO DRILLING!!!!!!!!!!!!!!!!!!


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