Shell eyes Arctic oil reserves
OFFSHORE: Spokesman says care would be required in development.
By KRISTEN NELSON
Published: November 29, 2005
Last Modified: November 29, 2005 at 05:45 AM
One of the world's biggest oil companies believes Arctic waters, including those north of Alaska, hold huge promise as an oil and gas frontier.
Oil and gas discoveries have not kept pace with rising energy demands, said Chandler Wilhelm, Alaska exploration manager for Shell Offshore Inc., a unit of Royal Dutch Shell.
The places that have provided most of the world's oil are in decline, he said.
And Shell sees "the Arctic as a very tantalizing opportunity to develop new oil and gas resources," really "the last remaining frontier." The company's views tend to support studies by academics and agencies that Arctic basins contain "about 25 percent of the world's remaining undiscovered resources," he said at the recent Resource Development Council annual conference in Anchorage.
All of these basins are outside of the control of the Organization of Petroleum Exporting Countries, Wilhelm said.
"Most of this potential lies offshore," he said, in an area with one-fifth of the world's ocean shelves, and "all of the essential ingredients for world-class hydrocarbon basins are present."
"Most of the basins are unexplored and undeveloped," but activities are accelerating, he said, with offshore licensing rounds in the Russian Chukchi Sea and Alaska's Beaufort Sea.
Wilhelm said Shell sees "significant opportunities" in Alaska's Arctic, where this year it purchased Beaufort leases at a federal sale of offshore waters.
Shell recognizes how "difficult and challenging" the social, environmental and economic aspects will be: "There's no misconception about that," he said. "And we must recognize that we're dealing with a sensitive environment and we have the responsibility to take very seriously the challenge of managing development with due consideration for the environment and the people who live there."
Under these conditions, development will simply "take longer and require more care and attention" than an equivalent operation onshore.
Wilhelm also said Shell has the responsibility to engage others and "listen to what they say about issues that concern them."
The cost of Arctic development is another major challenge, he said.
Shell believes that technology solutions developed for other areas, "such as the deepwater," will have applications in the offshore Arctic.
Problems of ensuring that oil and gas keep flowing freely in subsea pipelines are "virtually identical in the Arctic to those experienced in 8,000 feet of water in the Gulf of Mexico, where temperatures are at or close to the freezing point along the seafloor" and hydrates can form.
Technology for moving oil from the sea bottom to shore is similar to what is done in Norway, "and may someday have application in Alaska."
Arctic basins tend to be richer in natural gas than in oil, Wilhelm said. The "abundance of gas in the Arctic so far from main markets" will require moving gas long distances. Shell was one of the pioneers in developing liquefied natural gas, he said, and is "the largest private supplier of LNG in the world" and so is well positioned to bring gas to market, "including, potentially, gas from Alaska."
"We believe this particularly has application in some parts of southern Alaska," but he said Shell believes the construction of a North Slope gas pipeline "will be of supreme importance," not only for gas exploration but also for continued oil exploration and the future of the trans-Alaska pipeline. Associated gas, he said, is "the Achilles heel of frontier exploration" around the world.