Alaska's new oil and gas frontier: offshore activity surges in 2008.

• Author: Liles, Patricia
• Position: OIL & GAS

[ILLUSTRATION OMITTED]

While Congress members debate the merits and drawbacks f tapping the nation's oil and gas resources located off the nation's coasts, Alaska's oil and gas industry continues to steadily work on a variety of prospects in the state-managed, near-shore and the federally managed Outer Continental Shelf (OCS).

[ILLUSTRATION OMITTED]

Those range from initial seismic work in the Chukchi Sea, where a lease sale in February garnered $2.6 billion in high bids, to additional seismic and baseline data gathering in the Beaufort Sea while awaiting court rulings, to preparation for construction expected to start this winter on Liberty and Nikaitchuq, to the production start at Oooguruk.

While the surge in activity is unlike that in recent past years, most of these prospects have been previously drilled in the 1980s and 1990s, with roughly 30 wells drilled in the Beaufort and five in the Chukchi. Despite that considerable exploration drilling, no publicly touted environmental harm occurred.

Shell was a primary force in that past exploration, which yielded positive results but was not developed due to low market prices.

"No one was aware it was going on ... there was not an impact to the communities and there should not be an impact now to the communities and subsistence lifestyle," said Pete Slaiby, recently named Shell's general manager for Alaska. "Everyone knows now that throughout the world, we are working under a microscope. The level of scrutiny we're under from NGOs (non-governmental organizations) has increased 10- to 20-fold, since the 1980s and 1990s, and like it or not, it's become a real celebrity cause.

"We know that OCS drilling in the Arctic is a real motivating issue for some people," he added.

So much so, that Shell's planned summer and fall drilling program in 2007 that received prior approval from the U.S. Minerals Management Service that regulates OCS activity, was ultimately shelved in August due to a 9th Circuit Court of Appeals order blocking the work at the request of the North Slope Borough, environmental groups and other organizations.

Shell planned to complete two to three exploration wells on its Sivulliq prospect, located about 14 miles offshore in 98 feet of water, a prospect the company previously drilled in the 1980s. The company spent several hundred million dollars on its Alaska offshore exploration program in 2007, hiring more than 700 workers at one point. Lost in the public debate about Beaufort offshore drilling was that Shell planned to target a known oil accumulation, Hammerhead, that the company drilled and tested in 1985. Rick Fox, Alaska asset manager and a member of that past...