Shell's Game: Making the best of a bad hand.

• Author: Rhode, Scott
• Position: OIL & GAS

On September 28, 2015, Shell Oil abruptly ended its efforts to drill off Alaska's Arctic coast. At the time, the company had roughly 400 workers at an office in Anchorage, plus an additional 3,000 contractors anticipating another possible drilling season.

These days, Shell has little to no physical presence in Alaska. In 2021, the company had so much trouble finding an operator to explore its only remaining Beaufort Sea unit that the state Division of Oil & Gas had to approve an extension until the end of 2022.

That extended search is part of a process that began in late 2020, when official filings seemed to hint at a grand reprise of Shell's Alaska adventure. That inference, though, was colored by the wish for another major player to inject its industrial vitality into the state's economy.

Wishes aside, here's reality: "Shell has no intention of operating this unit and plans to fully divest out of the venture," Shell US media spokesperson Cindy Babski says in an email. Her earlier statements might have left some hope, as in 2020 when Babski told the website Arctic Today that the company's latest moves in Alaska were taken "in order to preserve our leasehold options." But those options are limited. There was never a chance that Shell's red-and-gold scallop would scuttle around the North Slope again.

Once bitten, twice shy, as the saying goes, and Alaska bit Shell in the past. The company's inclination to seek a graceful exit is perfectly understandable.

The Clock Is Ticking

On paper. Shell has a plan for activity in Alaska. Its subsidiary. Shell Offshore Inc., submitted a multi-year exploration plan for West Harrison Bay, northwest of the mouth of the Colville River, in August 2020. That was the first peep from the company since it was dealt some bad cards five years earlier.

The new timeline calls for a unit operator (yet to be named) to acquire seismic data by September 2022. Initial exploration drilling is scheduled for the winter of 2023/2024. A second well would be drilled the following season. Those first two winters would inform a new exploration or development plan to be submitted by October 1, 2025, ninety days before the plan of exploration expires.

Without the plan of exploration, Shell's access to West Harrison Bay would evaporate by the end of this year, ten years after the company first bought the eighteen leases covering 86,400 acres. The filing in 2020 was a request to consolidate the leases into a single unit. The state Division of Oil & Gas granted the unitization license in December 2020, which extended the...