Arctic frontier opens as Shell begins drilling in Chukchi Sea

Shell began boring its first well in the Chukchi Sea in more than two decades on Sunday, kicking off what company executives anticipate will be years of work tapping prospects throughout U.S. Arctic waters.

For Shell Oil Co., the launch of drilling is the culmination of more than six years of preparation and $5 billion in investments.

“I can’t downplay this. It’s obviously very exciting for us,” said Pete Slaiby, the vice president of Shell Alaska, in an interview from his office in Anchorage. “This is opening up a new chapter in Alaska’s oil and gas history that is literally starting today.”

Dozens of Shell Oil Co. employees were inside the company’s Anchorage office late Saturday in anticipation of the drilling, with some clustered inside a real-time operations monitoring center there. Slaiby said the enthusiasm was palpable.

The drilling began at Shell’s Burger find, about 70 miles off the Alaska Coast. To check for unexpected obstructions and create the foundation for the oil well to come, workers began boring an 8.5-inch-wide pilot hole that will extend roughly 1,400 feet beneath the sea floor.

The hole will later be widened and filled with drill pipe and cement, but for now, at least, Shell has to stop there. The company is barred from penetrating areas that could hold oil and gas until an oil spill containment barge arrives nearby and regulators sign off on the additional drilling.

Although the containment system could pass a deployment test and win a Coast Guard certificate of inspection early this week, it will take a little more than two weeks for it to sail to the region, cutting into an already brief drilling season.

That season closes Sept. 24 in the Chukchi Sea to allow time to drill a relief well if necessary before ice encroaches on the site. But Shell has asked the Interior Department’s Bureau of Safety and Environmental Enforcement for an 18-day extension. Without the extra time, it appears unlikely Shell would be able to complete a well there.

Even so, the company could continue so-called “top-hole drilling” of additional wells in the Chukchi Sea without penetrating hydrocarbon-bearing zones.

The company also is asking regulators to approve at least two wells in the nearby Beaufort Sea, where work is on hold until native Alaskans finish hunting bowhead whale migrating through the area.

Even if no wells are completed, Slaiby said the initial top-hole drilling this season will give the company an advantage next year. Shell estimates that about half of the time it will take to drill its Arctic wells to their target depth is consumed by the initial drilling and site preparation it now is performing in the Chukchi Sea.

“It is not a losing proposition for us by a long shot,” Slaiby said. “We are going to be in better shape going into 2013 to get more results.”

“This is a great ability for us, to get over there, to knock off what is arguably about half the time that we’ve got in any well,” Slaiby added. And, he said, “it gives us the ability to get up there and prove we can work flawlessly in this environment.”

Shell’s performance is being closely tracked by federal regulators as well as environmentalists who say the company and the government are ill prepared for an oil spill in the fragile Arctic ecosystem.

“Whatever Shell is able to do in the narrow window between now and when the sea ice returns, it won’t erase the clear evidence we’ve seen int he past two months that there’s no such thing as safe drilling in the Arctic,” said Greenpeace Deputy Campaigns Director Dan Howells. “Shell is in the vanguard of a new Arctic oil rush, but a global movement is growing to stop this from happening.”

Howells called the fight over Arctic drilling “one of the defining environmental battles of our age.”

Marilyn Heiman, director of Pew Environment Group’s U.S. Arctic Program, said Shell hasn’t inspired confidence so far, given recent “missteps and delays and requests for last-minute changes.”

The setbacks include the slow progress of the Arctic Challenger containment barge and Shell’s recent confession that it could not satisfy some of the terms of an air pollution permit for its Discoverer drillship. The Noble Discoverer also dragged its anchor while in Dutch Harbor earlier this summer.

Still, it is what happens over the next few months in the Chukchi and Beaufort seas that may do more to dictate the contours of future planned drilling in the region by Shell as well as competitors Statoil and ConocoPhillips.

In many ways, the U.S. Arctic is a new frontier for oil exploration. Until Shell’s exploration began Sunday, it had been more than two decades since a drill bit had touched the Chukchi Sea floor.

Chevron drilled the last Chukchi Sea well 21 years ago. Shell was responsible for the only other wells in the sea — four that were drilled from 1989 to 1991.

Shell’s drilling this summer sets the stage for years of exploration to come.

The company holds 275 federal drilling leases in the Chukchi Sea and another some 137 in the Beaufort.

“Our enthusiasm extends well beyond Burger to a portfolio that is huge,” Slaiby said. “We have a huge position and a great, position in both the Chukchi and the Beaufort.”

The knowledge from Shell’s 1990-era drilling — along with three years’ worth of 3-D seismic studies — gives executives confidence as the company taps the Burger prospect.

Still, it will take several wells to determine whether that confidence is justified.

“You can really look at these prospects with seismic, but it takes a well log for you to really understand what you’ve gotten,” Slaiby said. “And it will take a few logs, just because of the size of Burger, to understand what we’ve gotten.”

Here’s a Shell-produced animation of top-hole drilling: