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Eight years is a long time in the oil and gas business. In 2008, with the price of crude at $88 per barrel, multinationals including Royal Dutch Shell, ConocoPhillips and Statoil renewed their focus on Arctic waters, snapping up 2.8 million acres in the Chukchi Sea from the US Government for $2.6bn, on top of existing leases in the Beaufort Sea.

The business case seemed solid. The US Geological Survey estimates that the area above the Arctic Circle holds 30% of the world's undiscovered natural gas (1,670 trillion cubic feet) and 13% of its oil (90 billion barrels). With the oil price buoyant, energy demand spiking and the US shale gas revolution in its infancy, the Arctic represented a calculated risk for upstream operators with big balance sheets.   

Changing fortunes: companies cancel Arctic activities

Fast forward to September 2015 and Royal Dutch Shell announced that it was abandoning all activity in the region − having spent over $7bn in the Chukchi and Beaufort seas − citing disappointing results from its Chukchi test well combined with sky high operating costs and evolving regulatory standards.

The US Government swiftly cancelled two Arctic offshore lease sales and said it would not extend existing deals. In May this year, with the price of crude at less than half of its 2014 mark, Shell and its Arctic rivals relinquished a total of 2.2 million acres of drilling rights in the Chukchi Sea, well over 80% of the leases they purchased back in 2008. For now at least, Big Oil’s final frontier remains unconquered.

"Shell and its Arctic rivals relinquished a total of 2.2 million acres of drilling rights in the Chukchi Sea."

That is not the end of the story, however. A rise in the oil price to $80−$90 (roughly double the mark for Brent crude at the time of writing) could theoretically make exploration and production (E&P) in the US Arctic viable again for multinationals with deep pockets and a long-term strategic vision.

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By GlobalData

In the Norwegian Arctic, Eni’s Goliat FPSO in the northern Norwegian Barents Sea successfully came on-stream in March and is due to hit about 100,000 barrels per day at its peak, while in Russia Gazprom Neft’s ambitious plans for the rich Prirazlomnoye field on the Russian Arctic Shelf involve 36 wells.

For future E&P activity in the US Arctic to succeed, offshore infrastructure must be resilient enough to survive first and multi-year sea ice in extreme conditions. A recent collaborative study by the US Bureau of Safety and Environmental Enforcement (BSEE) and the University of Alaska took a forensic look at current offshore structural parameters and the federal standards that govern the industry.

Evolving threat: how sea ice can impact Arctic oil and gas operations

The objective of the two-year research project titled ‘Reliability-Based Sea Ice Parameters for Design of Offshore Structures’ was to produce information that would supplement current standards and regulations, and provide valuable additional sea ice data related to the Chukchi and Beaufort Seas.

Researchers gathered data from 16 seasons of sea ice measurements that provided comparisons of parameters such as first and last ice occurrence, ice level, rubble fields, ridges and ice movement. The team was then able to study a range of annual values to develop averages and draw conclusions.

“The study had multiple objectives but in a nutshell BSEE was looking to fill in some of the data gaps that it had identified in ‘ISO 19906 Standard: Petroleum and Natural Gas Industries – Arctic Offshore Structures’, and also to see if the structural design criteria in ISO 19906 was conservative enough for future Arctic structural design,” says Scott Carr, the analyst in charge of BSEE’s studies programme.

“Sea ice is probably the most severe environmental factor that we face in the Arctic and the threat it poses isn’t just confined to offshore structures, but also covers damage to oil and gas pipelines,” he adds.

"Sea ice is probably the most severe environmental factor that we face in the Arctic."

In the Barents Sea and the Russian Arctic, for example, grounded icebergs and those caught in tidal currents threaten underwater installations and pipelines. A significant number of very large icebergs are also produced around the Greenland continental shelf, while smaller masses known as growlers are also risky because they are both heavy and difficult to observe using satellites and ship radar.

Summer Arctic sea ice is not only melting more quickly; it is also becoming younger and thinner. Predicting the behaviour of this young, faster-flowing ice and its potential impact on oil rigs and related infrastructure represents a key challenge for the offshore industry in the decades ahead.

“In 2012, Royal Dutch Shell halted operations at the Burger-A well in the Chukchi Sea due to the unexpected movement of a 30-mile-long ice floe near the Hanna Shoals,” notes Carr. “Shell decided to carry out a planned disconnect and its return to the area was delayed due to continued sea ice.

“BSEE has since 2009 been involved in a study looking at the rapid changes taking place in the Arctic, including how much later in the season the area is freezing up as well as the ultimate limit of both first year and multi-year sea ice. Our recent collaboration with the University of Alaska looked at what we’re seeing in the Arctic at present and what sea ice science is predicting for the future − and whether or not the design criteria in ISO9906 is conservative enough to account for such changes.”

Deep impact: pressure ridge keels and report conclusions

The BSEE study describes the current implementation of ISO 19906 in US waters as “questionable” due to a lack of sea ice design criteria and assesses the suitability of the current recommendations for estimating global ice forces on offshore structures, with a particular focus on pressure ridges – the term given to angular ice blocks of various sizes that pile up when two or more ice floes meet.

Pressure ridges are significant for three reasons. Firstly, they represent the highest loads on offshore structures by drift ice. Second, ridged ice makes up around 40% of the overall mass of sea ice and so impacts navigation. Third, when pressure ridges drift into shallower areas, their keel – the part of the ridge below the surface − may come into contact with the seabed and threaten subsea pipelines.

“The primary investigator noticed that the pressure ridge keels in the Beaufort and Chukchi seas appeared to follow a predictable mathematical pattern and this information is extremely beneficial,” Carr explains. “The BSEE study identified critical keel depth and historical sea ice data was analysed in terms of temperature pressure, ice profiling, sonar anomalies, changes in density changes and sound/speed profiling in the water column. Further analysis focused on different sea ice features.

“The researchers concluded that the current standard of practice cited in ISO 19906 is conservative for current structural design parameters and that current offshore structures can withstand sea ice.”

"BSEE will use the information from this study and others to develop Arctic-specific infrastructure regulations."

The results of the study were presented to representatives from six Arctic nations during the Arctic Offshore Regulators Forum in Washington, D.C. in April. There are currently seven studies ongoing that assess offshore engineering technology and the conditions operators face in harsh Arctic conditions.

Shell is no longer working to extend leases that begin to expire in 2017 and has held on to just one tract in the Chukchi Sea. Carr hopes that the BSEE study will inform future offshore operations, if and when the US Government decides to sell leases in the Beaufort Sea in 2020 and the Chukchi in 2022.

“We are looking to the future,” he says. “BSEE will use the information from this study and others to develop Arctic-specific infrastructure regulations developed for the Alaska Outer Continental Shelf. This project was designed to get us ahead of potential issues that may occur in the future.”