OTC 2015: Shell discusses Alaska Arctic exploration plans

May 6, 2015
Despite regulatory and legal challenges, Shell plans to drill two exploration wells in the Chukchi Sea this year.

Offshore staff

HOUSTON– Despite regulatory and legal challenges, Shell plans to drill two exploration wells in the Chukchi Sea this year.

Ann Pickard, executive vice president, Arctic, outlined Shell’s Alaska Arctic exploration plans at a topical luncheon on Tuesday at the Offshore Technology Conference.

In her presentation “Shell in the Arctic – Strategies for the New Perspective,” she pointed out three questions drove her to take on the challenge of exploring the Arctic:

· Is now the right time?

· Do Arctic natives want their oil and gas resources developed?

· Can Shell operate safely in the region?

According to the US Geological Survey, the Arctic is estimated to hold 400 Bboe. Pickard noted that the region is estimated to hold 30% of the world’s undiscovered natural gas and 13% of the world’s undiscovered oil. The Alaska outer continental shelf is projected to hold 50 Bboe and has the potential to produce 1.2 MMb/d.

However, despite theregion’s vast potential, she pointed out a major hurdle is government regulations. “Current regulations are overly prescriptive,” Pickard said, “and permits arrive too late.”

Even with the low oil prices, she said the time is right to explore because in the long term oil prices will increase. She also noted advances in technology such as improved seismic imaging and modeling can lower the cost of exploration in the region.

An estimated four million people live above the Arctic Circle. Pickard says exploring in the region requires a balance between economic development and the local’s subsistence way of life.

“We have a great opportunity with a great obligation,” she said.

In 2014, Arctic Slope Regional Corp. (ASRC) and six North Slope village corporations joined to create a company known as theArctic Inupiat Offshore LLC (AIO). AIO and Shell entered a binding agreement that allows AIO the option to acquire an interest in Shell’s acreage and activities on its Chukchi Sea leases.

Despite recent setbacks such as theKulluk drilling rig running aground off Alaska in 2012, Pickard pointed out Shell has learned lessons and is moving the Noble Discovererand Transocean’s Polar Pioneer drilling rigs to the region.

“I am confident we can operate safely in the upcoming drilling season,” she said. “The burden is on us to prove it can be done safely.”