Shell files plan for Chukchi Sea drilling, starting next year

EXPLORATION: Work depends on resolution of district court appeal.

May 20, 2011 

Shell Oil recently filed an exploration plan for the Chukchi Sea with the Bureau of Ocean Energy Management, Regulation and Enforcement. The company said it expects to drill up to six wells in the Chukchi Sea, starting in the summer open water season of 2012.

Drilling in the Chukchi Sea is contingent on resolution of an appeal in the U.S. District Court in Alaska against the lease sale in which Shell purchased the tracts where it plans to drill.

In early May, the company filed a corresponding exploration plan for the Beaufort Sea off Alaska. The Beaufort plan called for drilling up to four wells offshore, also starting in 2012. Depending on factors such as ice and weather, the company would drill up to three wells a year in the Chukchi and up to two a year in the Beaufort, using the drilling ship Noble Discoverer and a floating drilling platform named Kulluk.

In addition to needing BOEMRE to approve its exploration plans, Shell will require the agency's approval of individual permits for each well before drilling can commence.

Shell also needs air quality permits for both its Chukchi Sea and Beaufort Sea drilling operations; earlier this year the Environmental Appeals Board remanded those permits to the Environmental Protection Agency for rework after a successful appeal of their issuance.

2010 PLAN DEFERRED

Shell had originally planned to drill up to three wells in the Burger, Crackerjack and Southwest Shoebill prospects in the Chukchi Sea in 2010 but the company was forced to defer that plan in the aftermath of the Deepwater Horizon well blowout in the Gulf of Mexico.

In 2011, the company opted out of any Chukchi Sea drilling because of continuing uncertainty over the district court appeal of the Chukchi leases. The company eventually abandoned a plan to drill in the Beaufort Sea in 2011 because of the remand of its air quality permit by the Environmental Appeals Board.

Shell has now filed its new Chukchi plan, presumably in anticipation of resolving both the district court appeal and the air quality permit appeal in time for drilling in 2012.

However, in its new plan, Shell says it wants to drill all its wells in the Burger prospect, using the Noble Discoverer. Burger, a 25-mile-diameter structure that is known to hold a major natural gas pool some 80 miles off the western end of the North Slope, was the star bidding target in the 2008 Chukchi Sea lease sale. Shell bid heavily for rights to explore the crest of the structure, including a $105 million bid on a single tract. Conoco Phillips purchased tracts on the perimeter of the structure.

DRILLED IN 1990

Shell is already somewhat familiar with the prospect, having drilled there in 1990 as part of an industry exploration program that resulted in five wells, the only ones ever drilled in the Chukchi Sea.

The Burger well bottomed out at a depth of 8,202 feet, having lost mud circulation in tarry rock after penetrating a 107-foot-thick, gas-bearing sandstone. Although the well demonstrated the existence of substantial gas in the sandstone, the total extent of the gas pool remains unknown. There is also the possibility of an undiscovered oil accumulation below the gas.

Geologists in the U.S. Minerals Management Service, the precursor to BOEMRE, estimated that the Burger might contain anywhere from 2 trillion to 63 trillion cubic feet of natural gas, with a most likely estimate of about 14 tcf.

According to Shell's Chukchi plan, if the company receives the go-ahead to drill again at Burger, it will drill to depths below its primary target, presumably to test the geology and hydrocarbon potential lower in the rock sequence.

START IN JULY

Shell's drilling ship will pass north through the Bering Strait at the beginning of July 2012, ready to start work as soon as weather and ice conditions permit. Drilling is expected to continue until the end of October 2012.

An ice management vessel, an anchor-handling vessel and two offshore supply vessels will support drilling. The supply vessels will carry supplies to the fleet from Dutch Harbor in the Aleutian Islands or from the Chukchi Sea coastal village of Wainwright. Aviation operations in support of the offshore activities will be conducted from Barrow and Wainwright.

Explorers will be prepared to deflect ice that threatens the drilling vessel, and drilling operations will stop and the drill vessel will move offsite in the event of severe ice.

Shell has agreed to cooperate with North Slope communities to mitigate any potential effects of drilling on subsistence hunting. The plan includes operation of communication centers in coastal villages.

Shell is also applying to the National Marine Fisheries Service and the U.S. Fish and Wildlife Service for authorization for the incidental harassment of marine mammals such as whales, seals and polar bears during offshore operations.

SPILL RESPONSE FLEET

Shell's oil spill response fleet will include an oil spill response vessel and barge, stationed in the vicinity of a drilling operation. An Arctic oil storage tanker will be available to reach the site within 24 hours of an oil spill. Shell is also constructing a containment dome to cap a well in the event of a blowout; the containment dome would enable oil escaping from the well to be captured and channeled through a pipe for collection by surface vessels.

Shell would have additional oil spill response vessels and equipment available, ready to take action within a reasonable time, if necessary, including an ice-strengthened oil spill response barge for nearshore operations, according to the plan.

The Noble Discoverer would be Shell's primary facility for drilling a relief well to plug an out-of-control well. If the Discoverer were to become incapacitated, the Kulluk would also be available to drill a relief well.

Shell's well-control plan emphasizes spill prevention through careful well planning, early detection of pressure kicks and real-time monitoring of drilling operations. The company has said a well blowout in the shallow water of the Chukchi is extremely improbable.

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