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With billions of barrels of oil and trillions of cubic feet of natural gas yet to be discovered, time is running out this year for companies planning to drill in the Arctic.
Thick sea ice and other permitting and regulatory delays are threatening to steal more time from one company with eyes set on drilling this summer in the Arctic.
But officials from Shell remain hopeful they will be able to push forward a downscaled plan to drill two wells this year – one each in the Chukchi and Beaufort seas. If weather and governmental higher-ups permit, it would take the company about 30 days to drill each well. Shell also plans to undertake foundational work, starting additional wells then returning next year.
“We’re very confident at this point that we can conduct some meaningful work for 2012 that would not only allow us to understand hydrocarbons in play but to get a head-start on 2013,” Curtis Smith, a spokesman for Shell in Alaska, told Hart Energy.
Already, drilling rigs and associated support vessels are positioned at Dutch Harbor Alaska, the last deepwater port before descending into the Bering Strait and ultimately into the Chukchi and Beaufort seas. But before the company is given the go-ahead, it must secure final permits needed to drill, which rests on securing certification of its Arctic containment barge, which would carry a containment dome capable of being lowered to a wellhead if a spill occurs. The certification is likely to trigger those final permits, Smith said.
Shell hopes to build a generational offshore oil and gas business in the Arctic that would last at least 50 years or more in the Arctic, Smith said, adding it all starts with finding and developing commercial quantities of hydrocarbons, specifically oil.
What’s At Stake
The US Geological Survey (USGS) estimates about 90 Bbbls of oil, 1,669 Tcf of natural gas, and 44 Bbbls of NGLs may remain undiscovered in the Arctic. Of this amount, 84% is believed to be in offshore areas. Holding about 22% of the world’s undiscovered conventional oil and natural gas resources, the Arctic continental shelves may be the largest unexplored area for petroleum left in the world.
Already, more than 400 oil and gas fields have been discovered north of the Arctic, mostly onshore and accounting for more than 240 Bbbls of oil and oil equivalent natural gas, according to the USGS. However, most of the Arctic’s unexplored areas are offshore, including 7 million sq km (2.7 million sq miles) on continental shelves in less than 500 m (1,640 ft) water depth.
“While the Arctic is rich in undiscovered oil and natural gas resources, the resources are concentrated in just a few sedimentary provinces,” according to a study on Arctic oil and natural gas potential by the US Energy Information Administration. “The three largest Arctic provinces account for 65% of the total Arctic oil and natural gas resources, and the largest 10 oil and natural gas provinces account for 93% of the total.”
And concentrations of natural gas versus oil vary based on the side of the Arctic on which one lands.
For example, the study noted the North American side of the Arctic is estimated to have about 65% of the Arctic’s undiscovered oil; however, it has only 26% of the area’s undiscovered natural gas. By contrast, the Eurasia side holds about 63% of the total Arctic resource base, while North America holds only about 36%. Most of Eurasia’s undiscovered Arctic resource is oil at 74%.
But efforts are under way in the US to open additional acreage for oil and gas development in the National Petroleum Reserve in Alaska. A proposed plan, which also would protect animals and coastal resources essential to Alaska natives’ lifestyle, was unveiled Aug. 13 by US Secretary of the Interior Ken Salazar.
Developers, however, face potential difficulty and hefty expenses when searching for oil and gas deposits. For example, equipment must be designed to endure extremely cold temperatures. Icepacks can damage offshore facilities and equipment. And limited transportation access could reduce options and up costs. Then, there are possible supply delays and courtroom challenges from environmentalists seeking to protect the area’s fish and wildlife resources and delicate ecosystems.
Safety A Top Concern
Safety of the people and the environment remain keys to successful operations with the Deepwater Horizon disaster still fresh on minds and the Exxon Valdez oil spill in 1989 as evidence of devastation in Arctic waters.
“It starts with prevention,” Smith said. “We are working in known areas that are relatively low pressure and are extremely shallow compared to what you might see typically see in deepwater Gulf of Mexico [GoM]. … We’re treating them as the most complicated wells we have ever drilled.”
Plans include use of BOPs to seal off wells, with capping stacks modeled after the one that stopped the blowout of the Macondo well in the GoM.
“We have made it Arctic ready, and we look forward frankly to never using it,” Smith said.
Shell also has buried pipelines several meters below the seabed to avoid potential damage from floating ice. Detection systems also monitor any drop in pressure, activating valve systems to halt oil flow, according to the company’s website.
The company also will have an onsite, a near shore, and an onshore oilfield response system that is Arctic built.
“When we purchased these leases, we knew that we were working in a very remote area and that we would have to bring everything that we needed with us the first time,” Smith added. “There is no phone to call for help. You have to rely on yourself. That’s why we purposefully built this oilfield response fleet.”
But time will only tell whether Shell will return for its next mission in the Chukchi and Beaufort seas. The company last explored for resources there in the 1980s and 1990s.
“Mother Nature is always in charge. Persistent sea ice has been an issue all summer, thicker and more prevalent than we’ve seen in over a decade,” Smith said. “We are not willing to rush any phase of this program. Would it be nice to be drilling right now? Of course, it would be. We’ve obviously waited five years for the chance. But we’re not going to sidestep any high hurdles or rush this process in any way because it’s just not worth it.”
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