Oil company delays exploration in Arctic waters off Alaska

Norwegian firm cites concerns over Shell's regulatory challenges.

Anchorage Daily NewsSeptember 6, 2012 

A Norwegian oil and gas company is delaying plans to explore for oil offshore in the Alaska Arctic until at least 2015 because of concerns about regulatory challenges faced by rival and sometimes partner Shell Oil Co., according to a company spokesman.

The decision by Statoil came in August, before federal regulators decided to allow Shell to drill in the Chukchi Sea, but that development doesn't change things, said Jim Schwartz, a Houston-based spokesman for Statoil.

"The bottom line is, in light of the significant uncertainty regarding Alaska offshore exploration, we've decided to take what we believe is a prudent step of observing the outcome of Shell's efforts before finalizing our own exploration decision time frame," Schwartz said.

Statoil earlier had targeted 2014 to begin exploratory drilling on its Amundsen prospect, some 120 miles off Alaska's northwest coast in the Chukchi Sea. The company spent $23 million to acquire interests in 66 Chukchi tracts in the same 2008 lease sale that saw Shell spend $2.1 billion for its Chukchi prospects. Statoil is the sole owner of 16 leases that include Amundsen and is a minority partner with Conoco Phillips on 50 more.

Other oil companies also are watching Shell, the biggest leaseholder in the offshore Alaska Arctic with investments topping $4.5 billion and rising. Shell had intended to drill in 2010 but the Deepwater Horizon blowout in the Gulf of Mexico halted all offshore work and prompted the government to adopt new spill prevention and response requirements. Now Shell is aiming to drill the first wells in two decades offshore in the Alaska Arctic.

Interior Secretary Ken Salazar last week announced that regulators had approved a drilling permit that allows Shell to begin construction of a single well without a key oil spill response vessel on the scene. But Shell can't drill deep enough to hit oil until the spill containment barge passes inspection in Washington state and makes it to the Arctic. The Environmental Protection Agency last week awarded Shell a one-year revised air pollution emissions permit for its Chukchi drilling rig, the Noble Discoverer.

Shell expected to begin securing the Discoverer to anchors already set late Thursday and begin drilling Friday or Saturday, spokesman Curtis Smith said.

Conoco Phillips, another major leaseholder offshore in the Alaska Arctic, still plans to begin exploratory drilling in 2014 on a Chukchi prospect it calls "Devil's Paw," spokeswoman Natalie Lowman said.

Conoco, which acquired 98 leases for $506 million in the 2008 sale, submitted its oil spill response plan to federal regulators in February and an exploration plan in March, Lowman said in an e-mail. Neither has yet been approved. Statoil is a minority partner in that project, with Conoco the operator.

Neither Statoil nor Conoco have yet acquired Arctic-ready rigs. Conoco is looking at state-of-the-art jackup rigs, which would work well in the shallow waters off Alaska's northern coast, Lowman said. Conoco expects to select a drilling rig this year, she said.

Statoil says it's too early to begin procuring or reconfiguring vessels for the Arctic.

Conoco started a scientific study program for the Chukchi in 2008 that Statoil and Shell both now help fund, hiring contractors to evaluate fisheries, seabirds and marine mammals. Statoil is evaluating whether to pull out of the research program, now that it has decided to hold off on its drilling plan.

Statoil has operations in 37 countries with 21,000 employees worldwide. In the Gulf of Mexico, Statoil is among the top leaseholders and is an active driller, adding two to four wells a year and working with partners on just as many, Schwartz said. Shell is a significant partner in the Gulf, he said. The Norwegian government owns 66 percent of Statoil.

Statoil opened an Alaska office in 2011 with about a dozen employees. They will continue to work on its Alaska project. The company doesn't yet hold any required permits for offshore Alaska, but may submit an exploration plan in mid-2013, Schwartz said.

No particular regulatory or legal challenge led to Statoil's decision to delay work in Alaska, which its exploration group made in August, Schwartz said.

"We do think it's important to observe whether they will be able to obtain all necessary permits, secure regulatory approvals and kind of demonstrate exploration operations can be reliably and cost efficiently conducted in the field," he said.


Reach Lisa Demer at ldemer@adn.com or 257-4390.

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