Skip to comments.Shell investing billions in Alaska to chase ‘giant’ offshore opportunity
Posted on 12/19/2011 10:59:29 AM PST by thackney
Standing in front of a brightly coloured, 3-D image of the geology far below the floor of the Chukchi Sea, Steve Phelps pointed to the giant opportunity that has prompted Shell to pour billions of dollars into the Alaska Arctic.
Burger thats the name you are going to get to know, Phelps recently told reporters gathered here to learn about the huge oil companys plans and promises for Alaska.
Phelps is Shells Alaska exploration manager, a geologist whose job it is to find big oil. The Burger field, part of a Shell naming theme that revolved around junk food, has been eyed by various oil companies for years. But its more than 110 kilometres offshore in the Chukchi Sea between Siberia and the northwest coast of Alaska and until recently was thought to be too expensive to develop. Now Shell for the second time holds the leases.
Armed with promising new seismic science, a sort of undersea sonogram of the Earths belly, the Dutch company says Burger is a signature find. Its the spark for ramping up controversial efforts to drill off the northernmost coast of the U.S. in some of the most extreme conditions on Earth.
This is the stuff that most of the world was finding in the 1930s, the 1950s, the 1960s, in places like Saudi Arabia and the Middle East, Nigeria, Phelps said. This one potential resource far outweighs any single field weve got in the Americas portfolio.
More than in the Gulf of Mexico, where drilling rigs checker the ocean and Shell led the way into deepwater zones that produce more oil than anyone predicted.
More than in Brazil, where Shell is the second-biggest oil producer after the state energy company.
More than in Canada, where Shell is investing billions to extract thick, sticky crude from tarsands.
As a result, Shell is at the centre of a classic Alaska development battle, gearing up to explore for oil as it confronts ever-higher regulatory hurdles and court challenges by environmentalists who say a big Arctic oil spill would be a disaster.
So far, Shell has spent nearly $4 billion on leases, groundwork and specialized equipment, including a new icebreaker being built in Louisiana.
At stake are billions in oil income and the reputation of a corporation that promotes a culture of safety but has been tarnished by troubles overseas.
In a sense, Shell is an old Alaska hand. Back in the 1960s, the company was the first to produce oil in Cook Inlet waters, where it had to engineer platforms able to withstand harsh winters and severe tides. Some of those platforms still produce today. But Shell sold those interests in the late 1990s, after their heyday.
Shell was an early explorer off Alaskas northern coast in the Arctic, but walked away from those leases in the 1990s. The company missed out on Prudhoe Bay, the most productive oilfield in the U.S.
So to many Alaskans today, Shell is an unknown quantity.
What can Alaskans expect from Royal Dutch Shell? After more than 100 years of oil exploration around the world, what is its reputation and record?
Shell executives and scientists talk about its technological know-how and commitment to prudent operations above all. The companys installations withstand 100-foot waves in the North Sea. Shell facilities produce in freezing temperatures offshore from Russias Sakhalin Island. One of its Gulf of Mexico platforms sits in water eight times deeper than the Eiffel Tower is tall a deepwater record.
Shell says it has never had a significant spill or incident in 30 years of leading-edge work in deep water, which is inherently more risky because of the high pressures.
Planning the right well and then drilling the well right, is how Shell managers put it time and again.
Shells Alaska leases are all in relatively shallow water, no deeper than 150 feet. If its prospects hold the vast amounts of oil that Shell hopes, it plans to build kilometres of subsea pipelines to transport the crude to shore, then more pipeline on land to get it into the trans-Alaska pipeline.
Our goal is zero harm to the environment. Zero harm to people. Safety is ingrained in every ounce of the business that we do, said David Lawrence, Shells executive vice-president of exploration and commercial development.
Shell expects employees to intervene if they even suspect something is going wrong, executives said. No gain is worth rushing a project at the expense of safety, they say.
Im not paid enough to take those risks. I wont take those risks. I wont let people who work for me take those risks, said Pete Slaiby, Shells vice-president for Alaska.
The company has a long history of competent work in the Gulf of Mexico, and will tap into the same expertise for Alaska, executives said.
But Shells record is not unblemished. There have been spills and environmental violations, according to critics, government records and news accounts.
In the Third World oil regime of Nigeria, the company has been accused of serious spills, human rights abuses and missteps that contributed to violence and the deaths of agitators there.
Shell is no different from other major oil producers in its relentless pursuit of profits and commitment to stockholders, critics say.
To industry watchers, Shells performance in challenging offshore operations is good, but not perfect.
They are one of the industrys most credible offshore operators, bar none, with a very long track record, said Mark Gilman, a New York oil analyst with the Benchmark Co.
Its not an unblemished track record. But then again, in the industry, virtually no ones track record is unblemished, either financially or environmentally.
Shell now aims to begin its exploration in midsummer 2012.
Technology has advanced over the decades to lessen the risk of drilling in the Arctic, Shell scientists say. And, they say, blowouts are unlikely here.
The Arctic wells are really straightforward wells with few challenges on executing them, said Williams, the chief well scientist for Shell. They are in shallow water. They are at low pressure, and they have what we call a margin. It gives you a lot of room to operate.
where is Obama to put the brakes on this...?
Active Lease Map, Beaufort Sea
Active Lease Map, Chukchi Sea
Oh no, it's another potential oil boom in another Red State! Quash it immediately, Obama! (Mmmm Mmmm Mmmm)
“Peak Oil” my ass. It will never, EVER run out.
“The Burger field, part of a Shell naming theme that revolved around junk food,....”
Burgers are not junk food!!
Electric cars are a passing fad...
This is not a ‘boom’ in terms of the world oil market, it is more akin to a thermonuclear explosion.
Shell (and many other major oil companies) have known for years that the Beaufort and Chukchi contain the last easily exploited super fields on the scope of the great middle east fields. The reason this is not more widely known in the USA is our gov’t continues to shut down all efforts to drill there.
The question one has to ask is why our gov’t would prevent its citizens from $1 gallon gas, massive tax revenues, 10’s of thousands of jobs, and most importantly, the ability to choke off the islamofascist middle east from their petro dollars?
The answer is the strange confluence of envirowackos, ethanol producers, alternative energy product manufacturers (think GE and their windmills and solar, and gov;t bureaucrats. You can also throw in probably some middle east money that is being pumped into the so called ‘green’ movement to hire lawyers to tie up any of our domestic energy projects like this in the US court system.
The fact this article is not in a US newspaper is all the proof you need that our citizens have been brainwashed by the political class to think we only hold 2-3% of the worlds oil reserves, when the truth is this one field in the Chukchi could be larger than any field ever discovered in America.
I have written on FR about the Chukchi for the last 3-4 years and it seems even FReepers are blind to the riches we may have within our grasp. The Chutchi may be in frigid Arctic waters, subject to ice and fierce storms, but the fact is the wells will be drilled in water HUNDREDS of feet deep rather than the BP well in the Gulf of Mexico which was in 1000’s of feet of water and drilled over a mile below the sea floor into a highly pressurized deposit.
The last line of the story says it all.............”. They are in shallow water. They are at low pressure, and they have what we call a margin. It gives you a lot of room to operate’. Translated that means easy to drill and safe to exploit. You would think a POTUS candidate would get a clue and teach the citizens what we have there for the taking. Instead, even some of the Republicans are so afraid of the envirowacko global warming lobby, they are afraid to broach the topic.
Newt says he would defy court orders he does not agree with. The Shell drilling fiasco of the last 4 years would be the best example I can think of where he could defy the courts and fast track our nation to energy independance and star the Islamists who wish to destroy our way of life.
They are if you make them properly.
LOL (literally). I want one!
Here is information on the original drilling plan, before Obama and the courts mucked everything up. NOte that some of the drilling is done in water less than 150 ft deep and each well only takes 37 days to drill. Contrast this with the Macondo prospect BP drilled.......The rig started drilling a well at a water depth of 5,000ft in MC block 252 in February 2010, but exploded during drilling in April 2010. The rig was on fire continuously for three days...
The company will carry out the drilling of three wells in the Chukchi Sea in 2010. The drilling programme has been approved by Secretary Salazar in 2010. The OSR fleet will be ready or placed close to the drilling location by 2010. The Prevention of Significant Deterioration permit authorisations is expected to be processed by the EPA in 2010.
“Each well is expected to take 37 days to drill.”
The three wells will be drilled in three different oil and gas prospects, defined by Shell as Burger, Crackerjack and SW Shoebill, within five years. Burger lies 90km from the Alaska shoreline and has three probable drill sites situated in three different blocks, namely Posey 6714, 6764 and 6912. Drilling over the Burger prospect will be carried out by Discoverer.
Crackerjack and SW Shoebill both have one block each with a drilling site. They are located in the central self region of the sea Outer Continental Shelf planning area. The drill sites have water depth of 142ft to 149ft. Each well is expected to take 37 days to drill and will be plunged or abandoned based on drilling results.
I have written on FR about the Chukchi for the last 3-4 years and it seems even FReepers are blind to the riches we may have within our grasp. The Chutchi may be in frigid Arctic waters, subject to ice and fierce storms,
Great project and I hope it pans out but how does this translate into $1 gasoline for American citizens? Maybe you can tell be better but I think most of it would be sold on the world market and be refined elsewhere. Where does Alaska oil go these days? It is sent to other countries (so I belive)
Alaskan oil is used in the US. That has been the case for all the years of North Slope operation except for a few years around 1996-2000. At that time there was a glut of oil on the US West coast where the oil is normally sent to be refined. Even then only ~5.5% was shipped overseas.
I never understood why people pushed this myth. Have you looked at a map? The lower 48 is far closer than any market in Asia. And the west coasts imports lots oil.
It is 3,577 miles from Valdez, Alaska to Tokyo, Japan.
It is 1,274 miles from Valdez, Alaska to Anacortes, Washington. (largest Washington refineries)
It is 2,253 miles from Valdez, Alaska to El Segundo, California (major refinery near Los Angeles)
This one deposit Shell controls may hold 77 BILLION BBLs A find that size is 1/3 rd of the Saudi’s ‘proven reserves. A find that size would put huge downward pressure on world oil markets no matter where it was sold. Maybe not $1 gas because of all the excise taxes the fed and state gov’t levy, but cheap gas nonetheless. Ammanutjob could block the Straits of Hormuz and would not bother us. Keep American $ at home, creat 1000’s of great jobs,give us true energy independance, and raise massive tax revenues for the federal gov’t. If there are 77 billion bbls at $100 bbl that is half the size of the federal deficit, that gives you and idea just how massive this deposit could be.
I would like to read more about that claim if you have a link.
I believe you are refering to the possible reserves for the entire Chukchi Sea, not Shell's single field.
Chukchi Sea reserves
The total reserves of the sea area are estimated to be in the range of four to 77 billion barrels of oil equivalent energy (boe) as per the MMS.
And that is the upper possiblity from a low of 4 billion.
Actually, the Burger field is not expected to contain oil at all. It is primarily a natural gas field with condensates (natural gas liquids and very light liquid hydrocarbons).
Summary of Economic Study of the Burger Gas Discovery, Chukchi Shelf, Northwest Alaska
(sorry, I didn’t find this one until after my last post, I should have searched first)
Did I read (or just dream) that all of the Execs. at Shell are voting for Obama in 2012? How can this be?
While there are lots of US offices for Shell Oil, the very upper management is not in this country. Shell is a Dutch company.
Thanks for clarifying the situation. California and Washington State oil refineries might be overwhelmed by this huge Alaska oil discovery and the enviro-wackos won’t allow the refineries to expand. This might force the oil to be sent abroad
LOL! That picture is literally making my mouth water. Yum!!
a bump and a ping...
Not hardly. The west coast already imports another 1.2~1.5 million barrels per day in addition to all the oil from Alaska. If it became that large, they could just displace that oil without any changes at the refineries.
At least half of those imports come from OPEC. We could do without them.
I happen to live near the Anacortes Shell refinery and have a brother who is a supervisor there. A lot of their oil comes from the Alaska pipeline but that flow is slowing. There are always oil tankers out there delivering crude to be refineries. I think the Anacortes Shell refinery is mostly for jet fuel though. There are other refineries though, BP and Tesoro here and then in Martinez CA there is another Shell refinery along with others.
Jet Fuel is mostly Kerosene. As you can see from the capabilities of the units at the Anacortes Shell refinery, that is a smaller output than some of the other products.
Capacity: 7.25 million tons/annum & 145,000 bbl/day
Vacuum Distillation - 65,500
Delayed Coker - 25,700
Fluidised Catalytic Cracking - 58,000
Catalytic Reformer - 32,700
- Naphtha - 32,900
- Gasoline - 37,400
- Kerosene - 16,000
- Diesel - 44,200
Sulphur Recovery Unit (SRU)
At Shell Puget Sound Refinery, 42-gallon barrel of crude oil typically produces:
gasoline, 20 gallons
diesel fuel, 10 gallons
jet fuel, 4 gallons
liquefied petroleum gas, 2 gallons
bunker fuel oil, 1 gallon
other products (petroleum coke, asphalt, road oil, lubricants, waxes, petrochemicals), 7 gallons
ANYTHING else does not make sense. With regards to drilling, what they are doing goes against National Security. We need to be energy independent. 200 years from now, when we finally do have a Mr. Fusion in every vehicle, the environment can heal whatever ‘wounds’ it has. For now, families have to be taken care, jobs are needed. for G-d’s sake, oil seeps into the oceans constantly.
Like everything else, the powers that be are sociopaths that don't give a rat's ass about anything other than lining their own pockets, and sure as hell couldn't care less about the environment.
Is that a Crispy Creme doughnut used as a bun????
It is a glazed donut. Brand names are not required.
Thanks for the help. I was just repeating what I remered being told without doing any research myself.
I went to check because I thought that only Alaska uses more Jet Fuel than gasoline.