The outer continental shelf: key to Alaska's oil future?

• Author: Phelps, Jack E.
• Position: OIL & GAS

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There is much at stake for Alaska in the ongoing discussion about oil and gas development in the offshore areas of the state. With new onshore oil field development stymied by congressional failure to authorize exploration in the coastal plain (Area 1002) of the Arctic National Wildlife Refuge (ANWR), and by continued delays of new exploration in the National Petroleum Reserve-Alaska (NPR-A), several oil companies have focused recently on searching for oil and gas in the Outer Continental Shelf (OCS).

Both BP and Pioneer Natural Resources Alaska have begun to develop OCS oil in the Beaufort Sea by the use of manmade offshore production islands. The first such was the Endicott facility and its associated satellite drilling island, now renamed Tern Island, located northeast of Prudhoe Bay. Endicott began production in 1987.

In 2009, BP extended Tern Island to accommodate development of the Liberty Prospect, which it has been developing since the late 1990s. Liberty will utilize extended reach, directional drilling to tap approximately 100 million barrels of undersea oil reserves in the Beaufort, with production expected to begin in 2011.

More recently, Pioneer built and developed the Oooguruk production island, also in the Beaufort Sea, to become the first independent oil company to begin production in the Arctic Ocean.

2008 Lease Sale 193

In 2008, Shell Oil Co. significantly strengthened its interests in Alaska by purchasing $2.2 billion in leases in the Chukchi Sea, totaling 276 blocks, according to Shell's Curtis Smith. In addition, Shell has invested another $1.3 billion making preparations to drill exploration wells in the Chukchi Sea. Shell also owns leases on 137 blocks in the Beaufort Sea.

ConocoPhillips has likewise invested heavily in Chukchi Sea exploration. According to spokesperson Natalie Lowman, the company has purchased interests in 98 lease blocks in the Chukchi alone, at a cost of $506 million and has invested "tens of millions" in work to develop those leases.

Another company with significant lease holdings in the OCS is Statoil, formerly Norwegian State Oil Co., which paid nearly $14 million for its successful bids in Lease Sale 193. Through its Statoil Alaska division, Statoil is the holder or joint holder of 16 lease blocks in the Chukchi Sea, in 14 of which Eni Petroleum holds a 40 percent ownership. Statoil, with 35 years experience in offshore development in the Norwegian continental shelf, is the operator on all 16 lease blocks. In addition, Statoil is a 25 percent partner with ConocoPhillips in the Devil's Paw prospect in the Chukchi, said to company Consultant, Ken Boyd.

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