[AirlinePilot]

Been trying to get a handle on what has been going on with possible production there. Seems that it may rival Prudhoe bay. Was wondering if anyone else....possibly some of our industry folks might know a few things about why Shell hasnt had success there yet, or why we have not drilled here sooner.

Cant seem to find a ton of info on it. There does seem to be some serious pressure from environmental groups and some court findings which seem to have put at least a short term lid on this.

[efarmer]

Shell Chief Executive Ben van Beurden:

"We are frustrated by the recent decision by the Ninth Circuit Court of Appeals in what is a 6-year-old lawsuit against the government," he continued. "The obstacles that were introduced by that decision simply make it impossible to justify the commitments of cost, equipment, and people that are needed to drill safely in Alaska this year."

"We have to wait for the courts and the US administration to resolve this legal issue," van Beurden said. "Given all of this, we will not drill in Alaska in 2014, and we are reviewing our options here."

A three-judge panel in the Ninth US Circuit appeals court ruled a portion of the environmental impact statements prepared prior to federal oil and gas leasing off Alaska's Arctic coast in 2008 was improperly prepared, and sent the matter back to the district court which heard the lawsuit for further action.

Shell already has endured multiple regulatory and legal delays, he noted. "Every year we are delayed from understanding the oil and gas resources under the Chukchi Sea only further delays the potential creation of tens-of-thousands of jobs, billions of dollars in tax revenue, and much-needed new oil for the Trans-Alaska Pipeline System," he said.


So it seems that three judges in California have a legal block running, and that the Alaskan Pipeline is in danger of freezing in winter due to not enough oil production from Prudhoe Bay being available to keep it full. In addition, the trend for Chuckchi is to have more ice free time, though the climate changes
being experienced are volatile and impossible to predict.

[ROCKMAN]

E - Here you go...all you might want to know. A year or two old but you should find all the current legal doings easily:

The Chukchi Sea is situated offshore, north-west of Prudhoe Bay, Alaska. The sea comes under the Arctic offshore ecosystem, which is not so favourable for oil drilling because of its climate, ice-covered sea and risk of oil spill. However, due to an increase in demand for oil and the high price of oil and gas, the US Government had to proceed with developing offshore resources. Shell purchased a portion of the lease area 193 by for $2.1bn in 2008. The sale was intended to lease the Chukchi area to bidding companies for further development. The sale of lease area 193 was completed in February 2008 and was managed by Minerals Management Service (MMS), the federal agency responsible for managing US oil, gas and minerals resources in the Outer Continental shelf. The sale marked the first Chukchi Sea lease sale since 1991 and the third offshore lease sale in the Chukchi Sea. Environmental groups opposed the deal contending that there was no mechanism in place to clean up the Arctic Ocean in case of an oil spill. Though the US Government has cancelled all the future leases in the Arctic Ocean till 2012, the Chukchi Sea Lease Area 193 was affirmed in 2011.

Seven companies bid and purchased different portions in the lease 193 zone. The companies include Conocophillips, Shell Gulf of Mexico, StatoilHydro USA E&P, the North American Case Research Association (NACRA), Repsol E&P USA, Eni and Iona Energy Company. "Shell purchased a portion of the lease area 193 in the Chukchi Sea for $2.1bn in 2008." Lease sale 193 was proposed earlier in the Federal Government's 2002-2007 oil and gas leasing programme but was delayed by the MMS due to incomplete environmental analysis. It was later added in the 2007-2012 leasing programme and finally executed in 2008. Prior to 193, two lease sales - 109 and 126 - were carried out in 1988 and 1991. A total of 351 and 28 leases were issued respectively in these areas. Five prospects were drilled, but there was no trace of commercial quantities of oil or gas. The leases expired and exploration was discontinued in 1992. With the fresh lease sale 193, the exploration is set to restart again. The 193 lease area starts from north of Point barrow and extends to north-west of Cape Lisburne and is spread over 29 million acres. The area covers 25 to 50 miles from shore out to 200 miles offshore. While the entire Chukchi Sea lease sale area consists of 5,354 blocks, the area leased to Shell under sale 193 includes 275 blocks.

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. Shell plans to develop four fields over the leased area. Oil and associated gas will be produced from fields one, two and four. Natural gas and condensate will be produced from field 3. The development plan also covers the construction of four offshore production platforms, offshore pipelines, onshore pipelines across the National Petroleum Reserve, Alaska to link to the Trans-Alaska system (TAPS) and a future gas pipeline from the North Slope. An onshore facility is also been planned to be developed to assist offshore exploration and drilling activities. The first oil field is expected to come on-stream in 2022. The production from the second oil field is expected to start in 2036. Condensate and gas production from field 3 is expected to start in 2022 and 2036 respectively. The fourth field will peak at around 25 million barrels per year from 2040 to 2044.

Exploration: Shell conducted 3D seismic studies over Chukchi Sea in 2006 and 2007. It participated significantly in prior exploration activity in the sea in 1980s and early 1990s. It also operated four of the five exploration wells drilled earlier. After winning the lease area 193, Shell further evaluated the contained blocks. "Shell plans to develop four fields over the leased area, which will produce oil and associated gas, natural gas and condensate." Shell Offshore proposed an exploration drilling programme in its Outer Continental Shelf Lease Exploration Plan 2010 in October 2009. The plan was evaluated and approved in December 2009 by the MMS. The company submitted an application for a pre-construction permit from the Environmental Protection Agency (EPA) for the operation of the Discoverer drill vessel and related fleet in December 2008. EPA has reviewed the application for the front-side Discoverer drill vessel in Chukchi Sea. The company is waiting for approval to proceed with exploration drilling activity in the Chukchi Sea Outer Continental Shelf. The permit pertaining to the Clean Air Act was given in 2011. For exploratory drilling, the project requires drill ships along with ice breaker support vessels due to high water depth and remoteness of the area. The drilling vessel and related fleet in Chukchi Sea will be over the 25-mile Alaska seaward boundary. The vessel will be operated in the area lying west of Point Barrow and North of Cape Lisburne.

Chukchi Sea infrastructure / drilling equipment: The Discoverer is a turret-moored drillship featuring self-powered equipment, an emergency generator and an incinerator. The drilling operations will be assisted by a related fleet, which include ice management vessels, oil spill response (OSR) fleet, a secondary icebreaker and a resupply vessel. Ice fleet management will include redirecting the ice floes close to the vessel while drilling and managing anchors are linked and separated from the sea floor. The ice management equipment will consist of two vessels, an ice breaker and an ice anchor handler. The OSR fleet will include one management vessel and various smaller craft (nearly 37ft). The smaller craft will be docked on the management vessel and will be in water for drills and response events.

Well drilling: The company will carry out the drilling of six wells in the Chukchi Sea from July 2012. It plans to drill at the rate of three wells a year. "Each well is expected to take 37 days to drill." The six wells will be drilled in Burger A, F, R, S, V. Burger lies 90km from the Alaska shoreline and has six probable drill sites situated in six different blocks, namely Posey 6714, 6764, 6912, 6812, 6762 and 69,15. Drilling over the Burger prospect will be carried out by Noble Discoverer.

[AirlinePilot]

As with other drilling prospects, especially in these more difficult regions......if they explored back in the 80's and 90's..why did they not drill then???

Price of oil too low? Or not enough bang for the buck in return???

Enquiring minds.

[PrestonSturges]

Shell's effort to drill offshore of Alaska unraveled and they nearly lost a drill ship.

http://www.commondreams.org/headline/2013/01/02

It was complicated, but I think the story goes they were moving a drill ship on New Years Eve in a storm for tax purposes.

Actually the Rachel Maddow Show had the best coverage of this.

[ROCKMAN]

Pilot - All possible reasons...and possibly others. Maybe a change in upper management or board of directors. Big Oil is like a oceangoing vessel: it can change directions but very slowly. As the geologic/economic metrics change so does the forward plan. But with a considerable time lag. Change the metric every several years and Big Oil can start stepping on its on feet while chasing its own tail. I've witnessed this up close and it can be really stupifying. LOL.

Consider how Shell rushed in to play catch up in the Eagle Ford, paid $1 billion for the lease on one ranch and then spent several $billion drilling 185+ wells before recognizing the lease wasn't worth a crap (average INTIAL production of those wells: 79 bopd. That's before the high decline rate kicked in). So then they run like a scalded dog from all the US shale plays and replaced the exploration oriented US head man with down stream refinery/marketing guy. How do you think he might feel about Arctic drilling...all warm and fuzzy??? LOL. Might be time or the SS Shell to start making another big but painfully slow turn on its Arctic voyage.

[PrestonSturges]

http://www.commondreams.org/headline/2013/01/02

Thirty-foot seas and an arctic storm are preventing rescue or salvage of a Royal Dutch Shell oil drilling rig that ran aground in Alaska on New Year's Eve.

The drilling rig, named the Kulluk, has not yet broken apart, but sits precariously just off Sitkalidak Island in the southeast part of the state. Reports indicate that the ship is intact, but worries are heightened that chances of spilling the vessel's 150,000 gallons of diesel fuel and other toxic lubricants increase with each passing hour.

[wildbourgman]

Airlinepilot, what I think happened to the Chuckchi Sea project is that it was run by a bunch of ass clowns that didn't understand politics or economics of a play like this. Shell spent billions of dollars and years of work for the right to drill, finally when they get their chance they turn it over to the operations folks who go cheap on the operation.

For example the drill ship they had the Noble Discoverer (not the rig in the picture) is a POS with a history of trouble. It was not "fit for purpose" which is a popular oilfield safety phrase now days, it was first built as a log carrier in 1966 and rebuilt as a drilling rig in 1976. It's much much cheaper that other rigs that Shell could have used. From second hand information and from my experience on some of these rigs from this era they are worn out junk, especially rigs that had been away from the GOM or the North sea for any number of years.

The Kulluk the rig pictured had been stacked alot over the years and when they went to move it in order to get it out of the coming storm they only sent one tug boat. In the GOM we send three tugs to move a small jack-up rig from point a to point b in calm weather. So then the Kulluk ran aground which was more a black eye than anything.

So in my opinion Shell should have had the PR people and the political types envolved in every decision on this project, because it's so costly when these mistakes are made. I think the reason the Kullk was left offshore rather than bringing it in to dock was that it's cheaper to have your rig wait offshore rather than pay for dock space and they also may have had to move the rig further from the drilling location to a port that doesn't get iced in.

It think the reason they chose the older rigs that anchor to the sea floor rather than a dynamic positioned rig is because of EPA air quality rules. If you use a new rig that has to use thrusters to keep on location you'll go over your emissions allotment and that cost money. There may be other reasons but I'm not aware of them. If you send three tug boats to retrieve the rig, then you'll go beyond EPA emissions allotment and that cost money.

So Airlinepilot, I don't think Shell failed to find oil, or proved the geology has no oil, or even proven you can't drill in this area safely. They haven't got far enough in the project to prove anything except that the guy they had in charge was rightfully dismissed. I hope they get a handle on the operation next time around.

[ROCKMAN]

Pstarr - I know it might be difficult to accept but seemingly very sophisticated companies can make some truly world class mistakes. And not for very good reasons. The pusher and I could dump dozens of examples on the site. It can be easy to confuse such severe stupidity with some secret agenda. Again consider the reason BP took the chances it KNEW it was taking at Macondo. And trust me all involved knew what the risk was. This was not a one off event. The well kicked just like it has happened THOUSANDS OF TIMES on other wells over the last couple of decades. Pusher: how many kicks have you controlled in your career without the well blowing out? And how much was BP trying save? My rough guess is about $5 million. I won't go into the technical details...to complex to for a short answer.

So how many $BILLIONS did BP lose performing a known risky procedure to save a few $millions? The folks that decided to take that risk were thinking about the huge potential downside. They were thinking about their next annual review and how saving that money would get them a few more points. I know of hands who were crippled and died for the very same reason.

[wildbourgman]

"So how many $BILLIONS did BP lose performing a known risky procedure to save a few $millions?"


Rockman, that's what I took a long time to explain. Shell spent billions in order to get to the point of drilling then they put people in charge that didn't understand what it had too to get to that point. They were as we say in the oilfield "stepping over dollars to pick up nickels".

You don't spend all those years and billions in order to get a permit to drill and then risk your permit because you are too cheap to spead a little extra to do things the right way on the operation. I don't think Shell would have acted that way in the GOM.

I've only done one well in the Arctic, but it's not that different from what I can tell, especially before it's real cold. Pstarr they were not drilling in Arctic conditions during that time of year. The main problems they had were themselves and the added regulations that they were dealing with on the fly.

For instance the EPA air quality regs are really silly. I'll give you an example of how things work in new GOM areas that have recently been drilled. We have a permit for only so much carbon emission in the block that we are drilling. So if we need a supply boat it has to come in from outside of the OSC block we are working in, the boat can't stay on side of the rig all the time as normal. The added emissions that the boat uses coming and going in at full steam to get to the rig back and forth makes very little difference to the permit, but where the boat parks at make a big difference. It's sillyness and actually causes more carbon emissions due to the added transit time. It's not about the environment, I don't think anyone at the EPA has really thought it out.

[toolpush]

Rockman,

I was actually contracted to a Shell company when they started their Arctic operation, the company man on board was actually consulted on the Arctic drilling program, but declined to take the job offer of actually working on the project. The original plan was to use the Stena Drill Max, a latest and greatest DP drill ship and ice class. When I told him that the 511, (Noble Discoverer) was drilling the wells, he did not believe me, until I showed him the article. He just shook his head and said no more. The rest is history.

PS The Noble Discoverer, aka Discoverer 511, is now the Petro Saudi Discoverer. Looks like Noble didn't like the rig as well.

[ROCKMAN]

Pusher - Sounds like a place you and I have been before: management making technical decision based upon nontechnical factors ignoring what the technologists recommended. You know how it was 30 years or so ago: geologists and engineers would start on an even plane. In time engineers would typically climb the corporate ladder faster. But eventually the engineers were often replaced with the economics majors and professional bean counters. And even when geologists and engineers got high up the ladder they often had to kiss economist ass to hang on to their positions.

[wildbourgman]

http://www.rigzone.com/news/oil_gas/a/1 ... a_Drilling

Noble In $12.2M Settlement With DOJ Over Alaska Drillingby Reuters|Monday, December 08, 2014

HOUSTON, Dec 8 (Reuters) - Drilling contractor Noble Corporation PLC on Monday said it paid $12.2 million to settle felony charges by the U.S. Department of Justice related to safety, environmental and record keeping violations on vessels in Arctic waters off Alaska in 2012.

During 2012, the Noble Discoverer drillship experienced numerous problems with its main propulsion system, including its main engine, resulting in engine shut-downs, equipment failures, and unsafe conditions, according to prosecutors.

Noble acknowledges that it failed to report any of these hazardous conditions to the U.S. Coast Guard, according to DOJ.

The Noble Discoverer was contracted by Royal Dutch Shell PLC to work on Shell leases in the remote Chukchi Sea off northwestern Alaska.

Charges also relate to Noble's operation of the Shell-owned drilling unit Kulluk, which ran aground in December 2012 after work in the Beaufort Sea. Noble failed to keep proper records on both vessels, prosecutors said.

Under the terms of the plea agreement, Noble will plead guilty to eight felony offenses, pay $8.2 million in fines and $4 million in community service payments.

The London-based company is also required to implement a comprehensive environmental compliance plan, and will be placed on probation for four years.

A spokesman for Noble said the company has made significant improvements to the Noble Discoverer since it entered the shipyard in 2013.

[ROCKMAN]

Wildman - Good to hear that Noble got slapped around a bit by the feds. Might keep a few hands from dying in the future. Always a great day when the suits have to pay up for poor safety protocols.

[wildbourgman]

It's still hard to believe that Shell allowed this to get that far. As good as Shell is in the Gulf of Mexico you wouldn't expect that in Alaska offshore especially when they know everyones watching. Yeah makes sence spend billions to get in the game and then go cheap on the rigs. That would be like someone spending an arm and a leg to buy a NFL franchise and then trading away all the star players in order to save money.

[Tanada]

It's still hard to believe that Shell allowed this to get that far. As good as Shell is in the Gulf of Mexico you wouldn't expect that in Alaska offshore especially when they know everyones watching. Yeah makes sence spend billions to get in the game and then go cheap on the rigs. That would be like someone spending an arm and a leg to buy a NFL franchise and then trading away all the star players in order to save money.

That does happen you know, we even have a cliche' about it. Penny wise and pound foolish. In American terms that would be saving pennies to lose twenties. In for a Penny in for a Pound I say If you are going to do something expensive make sure you do it the best you can so the effort is not wasted.

[wildbourgman]

In the oilfield I've heard "stepping over dollars to pick up nickels".

[sparky]

.
I would agree with the feelings above ,
but you know as well as me that the business is to get close to the optimum cost/benefit line .
sometimes there is a wrong call, made by optimistic , ignorant or delusional people ,
they can get away with it and be hailed as great guys , or it can go all pear-shaped and the tool pusher or master is the first blamed
sometimes it's just too hard, arctic is no place to shave the safety margin , in fact no place is ,not with oil or gas

[wildbourgman]

.
I would agree with the feelings above ,
but you know as well as me that the business is to get close to the optimum cost/benefit line .
sometimes there is a wrong call, made by optimistic , ignorant or delusional people ,
they can get away with it and be hailed as great guys , or it can go all pear-shaped and the tool pusher or master is the first blamed
sometimes it's just too hard, arctic is no place to shave the safety margin , in fact no place is ,not with oil or gas

Sparky this fiasco was much bigger of a screw up it was a series of bad decisions from the highest level. I've been on a drilling project offshore Alaska, it's something that can be done and it has been done.