The area above the Arctic Circle encompasses about 12 million square miles, or roughly 6 percent of the earth’s land mass.
The U.S. Geological Survey estimates that this environment contains close to 90 billion barrels of technically recoverable oil, with nearly a third of this resource located under the American Continental Shelf.
It’s no surprise, then, exploration/drilling interest in the Arctic region is intense.
The highest profile action currently is Royal Dutch Shell’s activity offshore Alaska in the Beaufort and Chukchi seas.
The firm has spent more than $5 billion over the past six years on permits, leasing, regulatory meetings/issues, meetings with the indigenous populace, etc., in preparation to drill these locales – with no hydrocarbons yet to show for this effort.
Shell’s experience in the Arctic was an integral component of the program at the recent Arctic Technology Conference (ATC) in Houston, which attracted 1,243 attendees from 26 countries.
“Shell is in the hot seat,” said Robert Blaauw, senior adviser-global Arctic theme at Shell, one of the speakers at the recent ATC. “Every day there are stories that are good and also bad.”
“Our Facebook site has two million people on it, exchanging notes, opinions on operating – the physical and social challenges, setbacks and logistics,” Blaauw noted.
It just goes with the territory, so to speak, even though Shell and other companies have drilled in the region in earlier times.
“Many are surprised to learn there’s a 100-year science record in the Arctic,” Pete Slaiby, vice president Shell Alaska, said during a much-anticipated ATC luncheon presentation that chronicled Shell’s recent, often challenging Arctic experiences.
“A great deal of that science,” he said, “comes from industry.”
In the Arctic, the targeted resources are conventional.
The environment is way unconventional.
Slaiby reminded the luncheon crowd that heading the list of unconventional challenges is the remoteness of this region.
First you hop onto a plane and fly to the end of the earth, he said. Forgetting your toothbrush is the least of your concerns when you board a “chopper” to fly for an hour over open frigid waters, often shrouded in fog, to reach the drill site – and pray that the so-called Jesus bolt does its expected job of keeping the main rotor attached.
Once in the Arctic, it’s not uncommon for some of the approximately 1,000 workers employed on the Shell program to be stranded at sea or onshore when fog settles in.
Moving multiple vessels, helicopters, fixed wing aircraft, icebreakers and other equipment to the drilling locations while avoiding the low-hanging fog and floating sea ice is a whole other problem.
Despite the years of time and the billions of dollars invested, problems began early on in Shell’s 2012 drilling program.
For starters, the sea ice hung around longer than anticipated. Once the action kicked off, the drillship Noble Discoverer dragged anchor and bobbed along out of control at nearby Dutch Harbor, Alaska. Dutch Harbor is the closest deep-water port for extra supplies that may be needed at the Shell drill sites more than 1,000 miles away.
Even the whaling season, which curtails activity, was twice as long as usual in 2012, according to Blaauw.
A final blow to the year 2012 plans occurred when Shell’s unique oil spill containment barge was damaged during certification testing.
With the cloud of the infamous Macondo debacle still hanging heavy over the offshore industry, it became time to re-group.
Regulators made it clear that no oil containing zones would be penetrated prior to onsite location of a certified containment system to capture flowing liquid hydrocarbons in the event of a loss of well control.
With time running short to accomplish any major drilling activity before the mandatory close of the drilling window, the company managed to get a head start on 2013 by drilling the top hole sections of two wells in the Beaufort and Chukchi target areas. The top holes are above any hydrocarbon-bearing zones.
The company reportedly commented that a top hole accounts for more than half the drilling time for the kind of well it intends to drill in its Alaska program.
The presence of dynamic, multi-year sea ice is a prominent and obvious challenge in the Arctic.
“Fortunately, by way of automated underwater vehicles and shallow hazard seismic surveys, we have an excellent and historic picture of what’s happening on the sea floor in terms of ice scouring and ice gouging,” Slaiby said. “The images we are left with – ice interacting with the seafloor – could impact a potential pipeline or platform, and that’s something we need to account for.”
Social issues also loom large in this environment, and Shell has expended countless hours meeting with the stakeholders who populate the region.
“Our program is changed for the better as a result of all that dialogue,” Slaiby said.
“Stakeholders in the Arctic have important views of offshore exploration,” he noted. “They have much to say on how, when and who should ultimately have the opportunity to search for oil and gas reserves, reserves that are believed to be rivaled by very few places on earth.
“And why shouldn’t they?” he commented. “After all, Alaska’s Inupiat have found their ocean bounty for centuries on the surface of the water, not what lies beneath.
“They have no intention of trading one resource, i.e subsistence hunting, for another,” he emphasized. “That’s why we spend so much time talking to local stakeholders about ways we can mitigate our footprint on the environment and, more to the point, our impact on the lives of the people we work around.
“I’m proud to say that a large number of the men and women who work on our oil spill response vessels are local stakeholders,” Slaiby said. “Many of them are whalers.”
He noted also that Alaska Native corporations and private businesses are pursuing and winning contracts for work on Shell projects.
With so much at stake for so many, information – and its origin – is crucial to ensure everyone is on the same page.
“As an industry, we must speak with a single voice,” Blaauw said. “We need to be on point with our message and communicate, communicate, communicate.
“And we must work together to reduce risk, cost, footprint and exposure of people to the Arctic environment,” he noted. “Let’s look at drilling slimmer wells, faster wells with fewer people.
“Logistics makes up a huge part of our cost of development – let’s look at integrated solutions.
“We shouldn’t hype this as a race,” Blaauw cautioned. “If there’s a race, it’s a joint race to do it right.”
Slaiby added, “If perfection is not your aspiration, the Arctic is not for you.”
“I have a list of important learnings from this past season that will keep me, and the people who work for me, fully engaged until we start again next year,” he added.
For now, some companies are watching and waiting in the proverbial wings.
Statoil supposedly will wait until 2015 at the earliest to drill on its leases in the Chukchi Sea after witnessing the setbacks Shell has experienced.
It’s generally understood that not many companies can fork over billions of dollars on plays that likely need technology that has yet to be developed. An industry analyst was quoted recently as saying that Shell views itself as a sort of leading technology company.