Chukchi Sea Permit, Alaska, United States of America


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.

Shell's Chukchi Sea permit location

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.

Lease 193 area development plans

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.