Reuters: Shell top bidder on 33 Alaskan oil and gas blocks: "It's unclear whether the play will be oil or gas," said Tom Homza, geologist and Anchorage office manager for Shell. "There's a gas seep in the area. There's an oil structure in the area. So there could be both.": Wednesday 26 October 2005

By Yereth Rosen

ANCHORAGE, Alaska, Oct 26 (Reuters) - Shell Exploration & Production, a unit of Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research), on Wednesday said it was the highest bidder on 33 blocks in an Alaskan oil and gas lease auction.

Shell bid $954,063 for 33 tracts in and around a small bay on the north side of the Alaska Peninsula for exploration rights in a part of Alaska that government officials hope will become the state's newest energy province.

Also submitting bids in the state lease sale was Hewitt Mineral Corp., an Oklahoma company that offered $313,922 for four other tracts in the same area, according to the division.

Despite the modest dollar amounts and the participation of only two companies, results of the state's first Alaska Peninsula lease sale since 1984 were "very positive for the state," considering that there are no pipelines or any other oil field infrastructure in the region, said Mark Myers, director of the state Division of Oil and Gas.

Although the region's basin is considered to be mostly prospective for natural gas, the area that drew bids on Wednesday holds oil as well, Myers said.

That area lies between the tiny Aleut village of Nelson Lagoon and Port Moller, home to a seasonally operated fish processing plant.

A Shell official said the company plans to explore for either type of hydrocarbon.

"It's unclear whether the play will be oil or gas," said Tom Homza, geologist and Anchorage office manager for Shell. "There's a gas seep in the area. There's an oil structure in the area. So there could be both."

The region is one of the most productive grounds for commercial and sport fishing in the world. It includes Bristol Bay, home to the world's largest sockeye salmon runs, as well as rich harvests of crab and other seafood. The area is also a haven for marine mammals and sea birds.

Myers said the lease terms mandate special mitigation measures to spare harm to fish, wildlife and local activities. For example, all drilling must be conducted from onshore, even though most of the tracts leased were offshore, he said. "We're relying, extensively in some cases, on extended-reach drilling," he said.

(Additional reporting by Deepa Babington in New York)

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