The Chukchi Sea is situated offshore, north-west of Prudhoe Bay, Alaska. The sea comes under the Arctic ecosystem, which is not favourable for oil drilling because of its climate, ice-covered sea and risk of an oil spill. However, due to an increase in demand for oil and the high price of oil and gas, the US Government had to proceed with developing offshore resources.
Shell purchased a portion of the lease area 193 by for $2.1bn in 2008. The sale was intended to lease the Chukchi area to bidding companies for further development. The sale of lease area 193 was completed in February 2008.
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Minerals Management Service (MMS), the federal agency responsible for managing US oil, gas and minerals resources in the Outer Continental shelf, manages lease area 193. The sale marked the first Chukchi Sea lease sale in 1991 and the third offshore lease sale in the Chukchi Sea.
Environmental groups opposed the deal contending that there was no mechanism in place to clean up the Arctic Ocean in case of an oil spill. Though the US Government has cancelled all the future leases in the Arctic Ocean till 2012, the Chukchi Sea Lease Area 193 was affirmed in 2011.
Seven companies bid and purchased different portions in the lease 193 zone. The companies include ConocoPhillips, Shell Gulf of Mexico, StatoilHydro USA E&P, the North American Case Research Association (NACRA), Repsol E&P USA, Eni and Iona Energy Company.
Lease sale 193 was proposed earlier in the Federal Government’s 2002-2007 oil and gas leasing programme but was delayed by the MMS due to incomplete environmental analysis. It was later added in the 2007-2012 leasing programme and finally executed in 2008.
Prior to 193, two lease sales, 109 and 126, were carried out in 1988 and 1991. A total of 351 and 28 leases were issued respectively in these areas. Five prospects were drilled, however, there was no trace of commercial quantities of oil or gas.
The leases expired and exploration discontinued in 1992. With the recent lease sale 193, the exploration is set to restart again.
Shell received approval for the original Chukchi Sea exploration plan in 2009. Over the next few years, the company came up with revisions before obtaining conditional consent for the project in 2015.
Shell announced the end of exploration in the Chukchi Sea region in September 2015. The Burger J exploration well was decided to be sealed and abandoned as per US regulations.
Shell’s Chukchi Sea permit location
The 193 lease area starts from north of Point Barrow and extends to north-west of Cape Lisburne and encompasses more than 29 million acres. The area covers 25 to 50 miles from shore out to 200 miles offshore. While the entire Chukchi Sea lease sale area consists of 5,354 blocks, the prospect leased to Shell under sale 193 includes 275 blocks.
Chukchi Sea reserves
The total reserves of the sea area are estimated to be in the range of four to 77 billion barrels of oil equivalent energy (boe) as per the MMS.
Lease 193 area development plans
Shell plans to develop four fields over the leased area. The first, second and fourth fields will be used to produce oil and associated gas, while field three will provide natural gas and condensate.
The development plan also covers the construction of four offshore production platforms, offshore pipelines, onshore pipelines across the National Petroleum Reserve, Alaska to link to the Trans-Alaska system (TAPS) and a future gas pipeline from the North Slope. An onshore facility is also planned to be developed to assist in offshore exploration and drilling activities.
First oil from the field is expected to come on-stream in 2022. The production from the second oil field is expected to start in 2036. Condensate and gas production from field three is scheduled to begin in 2022 and 2036 respectively. The fourth field will peak at around 25 million barrels per year from 2040 to 2044.
Exploration
Shell conducted 3D seismic studies over the Chukchi Sea in 2006 and 2007. It participated significantly in prior exploration activity in the sea in the 1980s and early 1990s. It also operated four of the five exploration wells drilled earlier. After winning the lease area 193, Shell further evaluated the contained blocks.
Shell Offshore proposed an exploration drilling programme in its Outer Continental Shelf Lease Exploration Plan 2010 in October 2009. The plan, after an evaluation, was approved in December 2009 by the MMS.
The company submitted an application for a pre-construction permit from the Environmental Protection Agency (EPA) for the operation of the Discoverer drill vessel and related fleet in December 2008. EPA has reviewed the application for the front-side Discoverer drill vessel in the Chukchi Sea.
The company is waiting for approval to proceed with exploration drilling activity in the Chukchi Sea Outer Continental Shelf. It received the permit pertaining to the Clean Air Act in 2011.
For exploratory drilling, the project requires drillships along with ice breaker support vessels due to high water depth and remoteness of the area.
The drilling vessel and related fleet in the Chukchi Sea will be over the 25-mile Alaska seaward boundary. The vessel will operate in the area lying west of Point Barrow and North of Cape Lisburne.
Chukchi Sea infrastructure/drilling equipment
The Discoverer is a turret-moored drillship featuring self-powered equipment, an emergency generator and an incinerator.
The drilling operations will be assisted by a related fleet, which includes ice management vessels, oil spill response (OSR) fleet, a secondary icebreaker and a resupply vessel. Ice fleet management will include redirecting the ice floes close to the vessel while drilling and managing anchors are linked and separated from the seafloor. The ice management equipment will consist of two vessels, an ice breaker and an ice anchor handler.
The OSR fleet will include one management vessel and various smaller craft (nearly 37ft). The smaller craft will be docked on the management vessel and will be in the water for drills and response events.
Well drilling
The company will carry out the drilling of six wells in the Chukchi Sea from July 2012. It plans to drill at the rate of three wells a year.
The six wells will be drilled in Burger A, F, R, S, V. Burger lies 90km from the Alaska shoreline and has six probable drill sites situated in six different blocks, namely Posey 6714, 6764, 6912, 6812, 6762 and 69,15. Drilling over the Burger prospect will be carried out by Noble Discoverer.
