Shell's multi-billion dollar waiting game: needs decision this year on Alaska OCS leases.

AuthorResz, Heather A.
PositionOIL & GAS - Outer continental shelf - Shell Oil Co.

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Tremendous treasure likely lies buried beneath a couple hundred feet of water in the outer continental shelf off Alaska's northern coast. The petroleum resources estimated to be here are among the largest known sources of oil remaining in the nation, according to the Bureau of Ocean Energy Management, Regulation and Enforcement, formerly the Minerals Management Service.

Shell paid the two groups to study the "potential economic benefits to the state and local communities from developing OCS oil and gas resources."

Developing the resources contained in this gently sloping plain that separates the continent from the deep ocean could provide thousands of jobs, billions in wages, delay the need for a State income tax, and extend the life of the trans-Alaska oil pipeline, according to a March 2009 report.

Prepared for Shell by researchers at Northern Economics and the Institute of Social and Economic Research, the report, titled "Economic Analysis of Future Offshore Oil and Gas Development: Beaufort Sea, Chukchi Sea, and North Aleutian Basin," considers potential economic benefits to the State and local communities of developing OCS oil and gas resources.

"OCS-related employment growth could more than offset losses from the decline of petroleum production on State lands and could help sustain the economy for several decades," according to the report.

In terms of jobs, OCS development could generate an average of 35,000 jobs annually with a total payroll of $72 billion over 50 years, according to the study.

It could also generate billions for State and local governments, change the size of a natural gas pipeline project, and extend the number of years it would have gas to ship.

The Chukchi and Beaufort seas contain an estimated 34 billion to 36 billion barrels of oil and 150 trillion cubic feet of gas, according to the 2009 report "Alaska's North Slope Oil and Gas: A Promising Future or an Area in Decline?" commissioned by the U.S. Department of Energy.

MONEY AND PATIENCE

Since returning to Alaska in 2005, Shell purchased billions in leases in the Beaufort and Chukchi seas, spent half a billion more on pre-exploration work to drill on those leases and hundreds of millions more defending its plans against a string of legal challenges.

"I don't think we have an endless supply of patience," said Shell's Alaska Venture Vice President Pete Slaiby. "We need a decision this year."

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