Statoil delays start of Chukchi drilling until at least 2015

Shell Oil Co. already has scaled back its Arctic oil drilling program this summer amid major setbacks, and now Statoil is following suit.

The Norwegian company is delaying its own plans to search for black gold in icy U.S. waters north of Alaska by at least one year, to 2015 at the earliest.

The delay affects Statoil’s Amundsen prospect in the Chukchi Sea, about 100 miles northwest of Wainwright, Alaska. Statoil had been preparing to begin boring an exploration well there in 2014.

But it makes more sense to wait and see how Shell’s exploration in the area proceeds, Statoil spokesman Jim Schwartz said.

“We’re looking at the uncertainty going with regard to Alaska offshore drilling,” Schwartz said. “We decided to take a prudent step of observing the outcome of Shell’s efforts before finalizing our exploration timeline.”

Shell is set to launch initial drilling at its Chukchi Sea prospect this week, but it is barred from penetrating underground oil-bearing zones until an emergency oil spill containment barge has been certified by the Coast Guard, proven to regulators and moved on-site.

A retrofit of the 36-year-old Arctic Challenger spill containment barge has taken
longer than expected and is ongoing in a Bellingham, Wash., a two-week journey from the Arctic.

With a narrow drilling window that closes Sept. 24 to avoid encroaching ice, it looks increasingly unlikely Shell will be able to complete a single Chukchi Sea well, unless Interior Department regulators relax that deadline. Shell had hoped to drill five wells in the Chukchi and Beaufort seas this summer and five more next year.

Although oil companies drilled more than 30 wells in the Beaufort and Chukchi from 1982 to 2001, Shell’s performance this summer is being watched closely by Statoil, ConocoPhillips and other companies eager to exploit the frontier.

The potential prize is huge. The U.S. Geological Survey estimates that
the area north of the Arctic Circle contains 90 billion barrels of technically recoverable oil and 1,670 trillion cubic feet of technically recoverable natural gas.

Schwartz said Statoil still hasn’t made a firm decision about whether to pursue Amundsen prospect work in 2015. Company officials want to see how Shell navigates regulatory hurdles and technological challenges.

Statoil also has been meeting with native Alaskan communities in northern Alaska as part of its path toward drilling the Amundsen well.

Separately, the company is a minority partner in ConocoPhillips’ Devil’s Paw prospect in the Chukchi Sea, where wells could be drilled in 2013 or 2014.

It could be a decade or longer before any oil discovered in the Chukchi Sea could make it to market via a pipeline running from the remote waters and through the National Petroleum Reserve-
Alaska to the Trans Alaska Oil Pipeline system.

Shell already has begun environmental studies that would be necessary for any such pipeline project.

Statoil’s new wait-and-see approach to U.S. Arctic waters contrasts with its plan to keep drilling in other Arctic areas, including several wells in the Barents Sea in 2013.

The Barents Sea is a less forbidding environment than the Chukchi and Beaufort seas, because it is ice-free year-round, rather than just a few months each year.