Shell bullish on Chukchi oil and gas potential

By Yereth Rosen

ANCHORAGE, Alaska, April 4 (Reuters) - Alaska's Chukchi Sea, the remote region separating North America's northwestern tip from northeastern Siberia, is one of the "potentially most prolific oil fields" left in the world and could ultimately compare to the Gulf of Mexico as a source of domestic energy, a Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) official said Friday.

"We estimate maybe 100 different (geologic) plays out there," Rick Fox, Alaska assets manager for Shell, said in a speech to the World Affairs Council of Alaska. But only a few of them attracted bids in a record lease sale in which Shell put up $2.1 billion for exploration rights, he said. "Only about 14 of them got attention in the lease sale," he said.

The U.S. Minerals Management Service estimates the Chukchi holds 15 billion barrels of recoverable oil and 76.7 trillion cubic feet of natural gas. The February lease sale held by the MMS, the first for the Chukchi since 1991, drew $2.66 billion in high bids, the highest total for any Alaska lease sale.

Along with Anglo-Dutch Royal Dutch Shell, ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz), Repsol (REP.MC: Quote, Profile, Research, Stock Buzz), Eni (ENI.MI: Quote, Profile, Research, Stock Buzz) and StatoilHydro (STL.OL: Quote, Profile, Research, Stock Buzz) were active bidders in the Feb. 6 lease sale.

Oil exploration is just in its infancy in the Chukchi, Fox said.

While 50,000 wells have been drilled in the Gulf of Mexico, only five have been drilled in the comparably sized Chukchi, four of them by Shell in past decades, he said.

"If we think of it as a potential replacement for the Gulf of Mexico as a source of oil and gas for the nation, we're just getting started," he said.

Shell was active in Alaska's offshore provinces until the 1990s, when it sold off its Alaska assets. But now the company expects Alaska to become a key part of its global operations, Fox said.