Shell poised for Alaska prospects: plans include July through October drilling.

• Author: Hollander, Zaz
• Position: OIL & GAS - Cover story

[ILLUSTRATION OMITTED]

Royal Dutch Shell PLC is poised to ill for oil this summer in the Arctic Ocean off Alaska after spending nearly $4 billion and waiting out more than five years of delay.

Calling the Alaska Outer Continental Shelf a potential "game changer," corporate officials say they expect the oil below the frigid sea floor to justify the time, money and ongoing legal battles.

"We think Alaska's Arctic could be home to one of the most prolific hydrocarbon basins left in North America," Shell Alaska spokesman Curtis Smith says. "We've got a high degree of confidence that these are commercial leases."

Shell plans to drill as many as five exploratory wells on OCS leases in the Beaufort and Chukchi seas starting in late July and ending in late October--the extent of open-water season. The company still needs several federal permits. Shell's leases and permits have also drawn still-unresolved lawsuits centered on the project's risks to wildlife and the challenge of responding to an oil spill in the remote, ice-strewn waters of the Arctic--and, of course, Shell can't know how those leases will play out until they drill them.

The U.S. Geological Survey estimates there could be as much as 23.6 billion barrels of oil in the Arctic Ocean's OCS reserves. In the best-case scenario, that translates to Shell and other lease holders adding 1.2 million barrels of oil to the currently declining volume carried by the Trans-Alaska Pipeline System, Smith says.

Shell drilled a dozen wells in the Beaufort and four of five wells ever drilled in the Chukchi in the 1980s and early 1990s. Seismic images from 2006-2009 "match up nicely" with earlier drilling data, Smith says--but there's only one way to know for sure. "There's a saying," the Shell spokesman says, "you can really like your prospects on paper but you can't love them until you drill them."

Self-Sustaining Rigs

The waters of the Arctic present a daunting place to operate. Ice covers the area much of the year. Storms carry hurricane-force winds. Migrating bowhead whales sensitive to drilling activity move through its waters. Where the Lower 48 offers roads, ports and large harbors, Alaska's remote North Slope has only airstrips and boat ramps with few roads. In response, Shell designed its OCS projects to be self-sustaining, Smith says.

Provided Shell gets clearance to drill, crews will set the rig Kulluk in the Beaufort, some 18 miles north of Point Thomson and in 130 feet of water. The Noble...