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U.S. govt gauges interest in new Chukchi Sea offshore oil leasing
September 27, 2013 / 12:12 AM / in 4 years

U.S. govt gauges interest in new Chukchi Sea offshore oil leasing

ANCHORAGE, Alaska, Sept 26 (Reuters) - The U.S. government on Thursday started to formally gauge energy companies’ interest in future oil and gas leasing in the Chukchi Sea near Alaska, site of a trouble-plagued 2012 exploration season for Royal Dutch Shell Plc.

The “Call for Information and Nominations” issued by the U.S. Bureau of Ocean Energy Management (BOEM) is the first step in a potential Chukchi Sea lease sale under consideration for 2016, officials said.

The Chukchi, off Alaska’s northwest coast, is believed to be oil-rich, but its remote location and harsh Arctic Ocean conditions have challenged would-be developers.

The last Chukchi lease sale, held in 2008 by the Minerals Management Service, BOEM’s predecessor, drew a record $2.66 billion in bids, $2.1 billion of that from Shell.

Shell did preliminary drilling on one Chukchi well in 2012. After experiencing equipment failures and accidents, it declined to drill again this year. The company has announced no decision about returning to complete that well or drill others in 2014.

Shell’s well was only the sixth ever drilled in the Chukchi.

The call to industry on Thursday asks for nominations of specific blocks within the Chukchi that might be promising for new leasing, in order to focus on targeted regions that would avoid environmentally sensitive areas, BOEM said.

“Any future leasing in the Chukchi Sea must be focused on areas that can be developed safely and responsible while also protecting sensitive habitats and places that are important to Alaska Native hunters and fishermen,” BOEM Director Tommy Beaudreau said in a statement.

Environmentalists said it was a mistake even to consider new leasing in the Chukchi after Shell’s experiences, which included a grounded drillship, air-pollution violations and failure to secure needed oil-spill equipment.

“Shell’s long list of setbacks and failures during its 2012 Arctic drilling campaign, combined with the reality that there is no effective way to clean up an oil spill in Arctic conditions or infrastructure in the region to support an adequately safe drilling or cleanup effort, provides overwhelming evidence that the oil and gas industry is not prepared to operate in the Arctic Ocean,” said Cindy Shogan, executive director of the Alaska Wilderness League.

Other companies have active leases in the Chukchi, including ConocoPhillips and Statoil. Conoco planned to drill at least one well in 2014, but then announced this year an indefinite postponement.

The proposed 2016 Chukchi lease sale is one of three in a five-year BOEM leasing plan for Alaska’s outer continental shelf. Other lease sales are eyed for Cook Inlet in south-central Alaska and the Beaufort Sea off the northern coast.

Shell also did preliminary drilling in 2012 on a Beaufort exploration well. In the Beaufort, seven leases held by a variety of companies are due to expire this year, and 20 are due to expire in 2015, said John Callahan, a BOEM spokesman in Anchorage.

The Chukchi is believed to hold over 15 billion barrels of recoverable oil and the Beaufort is believed to hold over 8 billion barrels, according to federal estimates.

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