| Shell: Arctic
‘tantalizing opportunity’: Basins at the top of
the world believed to hold 25 percent of
undiscovered oil and gas, explaining Shell’s
interest in Alaska: 27 November 2005
Kristen Nelson
Petroleum
News Editor-in-Chief
As energy demands have grown, discoveries
have not kept pace, Chandler Wilhelm, Alaska
exploration manager for Shell Offshore Inc. told
the Resource Development Council’s annual
conference.
The basins which have been the source of
most of the world’s oil supply are in decline,
“and new sources of oil and gas must be found”
to meet the energy demands of the future, he
said Nov. 16 in Anchorage.
Shell, he said, sees “the Arctic as a very
tantalizing opportunity to develop new oil and
gas resources,” really “the last remaining
frontier.” The company’s views tend to support
studies by academics and agencies that
circum-Arctic basins contain “about 25 percent
of the world’s remaining undiscovered
resources,” he said (see map of main Arctic
basins).
All of these basins are outside of the
control of the Organization of Petroleum
Exporting Countries, Wilhelm said.
“Most of this potential lies offshore,” he
said, in an area with one-fifth of the world’s
ocean shelves, and “all of the essential
ingredients for world-class hydrocarbon basins
are present.”
“Most of the basins are unexplored and
undeveloped,” but activities are accelerating,
he said, with offshore licensing rounds in the
Russian Chukchi Sea and Alaska’s Beaufort Sea.
Wilhelm said Shell sees “significant
opportunities” in Alaska’s Arctic, where earlier
this year it took a substantial Beaufort Sea
position at a Minerals Management Service outer
continental shelf lease sale.
Arctic challenges
Wilhelm said there are a number of challenges
to working in the Arctic.
Health, safety, environment and social
performance issues include the sensitive
environment, safety and indigenous people.
“Development of the offshore resources
here in the Arctic in a sustainable manner is
absolutely fundamental,” he said.
Shell recognizes how “difficult and
challenging” the social, environmental and
economic aspects will be: “There’s no
misconception about that,” he said. “And we must
recognize that we’re dealing with a sensitive
environment and we have the responsibility to
take very seriously the challenge of managing
development with due consideration for the
environment and the people who live there.”
Under these conditions development will
simply “take longer and require more care and
attention” than an equivalent operation onshore.
Wilhelm also said Shell has the
responsibility to engage others and “listen to
what they say about issues that concern them.”
Cost a factor
The cost of Arctic development is another
major challenge, he said.
Shell believes that technology solutions
developed for other areas, “such as the
deepwater,” will have applications in the
offshore Arctic.
Problems of ensuring that oil and gas keep
flowing freely in subsea pipelines are
“virtually identical in the Arctic to those
experienced in 8,000 feet of water in the Gulf
of Mexico, where temperatures are at or close to
the freezing point along the seafloor” and
hydrates can form.
Subsea to beach technology is similar to
what is done in Norway, “and may someday have
application in Alaska.” The company’s most
recent subsea to beach tieback is at the
Goldeneye field off northern Scotland where
there are harsh offshore conditions. This
prospect was “originally regarded as marginal,”
but innovative technology made it possible. It
produces from an unmanned platform through a 65
miles offshore tie-back.
Shell has also gained experience
applicable to other projects at Sakhalin 2, the
largest oil and gas investment industry has
made. Shell has, he said, experience in
engineering solutions for remote locations,
short operating seasons and extreme climate and
ice.
Arctic gas prone
Gas solutions are also an issue because
Arctic basins tend to be gas-prone, Wilhelm
said. The “abundance of gas in the Arctic so far
from main markets” will require moving gas long
distances. Shell was one of the pioneers in
developing global liquefied natural gas, he
said, and is “the largest private supplier of
LNG in the world” and so is well positioned to
bring gas to market, “including potentially gas
from Alaska.”
“We believe this particularly has
application in some parts of southern Alaska,”
but he said Shell believes the construction of
an Alaska North Slope gas pipeline “will be of
supreme importance,” not only for gas
exploration but also for continued oil
exploration and the future of the trans-Alaska
pipeline. Associated gas, he said, is “the
Achilles heel of frontier exploration” around
the world.
Shell is in favor of a gas pipeline, he
said, and wants fair access for participants.
Cost effective exploration important
There are three “fundamental elements” to
successful exploration, he said: “good regional
geologic analysis, knowing what neighborhood to
be in; the focused application of world-class
technology, knowing which door to knock on when
you’re in that neighborhood; and excellence in
operational execution, enabling you to open that
door.”
The petroleum systems “of the Arctic are
truly world class,” Wilhelm said, but being in
the right place doesn’t get you there —
state-of-the-art technology is also important.
The short operating season is a challenge
and Shell uses a real-time operations center
with satellite connection to adjust well
execution.
Shell is also working on research and
development: extending the season; cost
reduction; systems reliability; and subsea
systems.
“We have a long history of innovation and
our experience in the deepwater we think can
serve as a guide for the possible impact of
technology in bringing oil and gas from hostile
offshore environments to market,” he said. |
