April 10, 2013 / 4:31 PM / 7 years ago

UPDATE 2-In about-turn, Conoco shelves Alaskan Arctic drilling plan

By Yereth Rosen

ANCHORAGE, Alaska, April 10 (Reuters) - ConocoPhillips shelved plans to drill exploration wells in the Chukchi Sea off Alaska next year due to U.S. regulatory uncertainty, a month after the company said it would press ahead with drilling there.

In another major step back from drilling in Arctic waters near the state, ConocoPhillips said on Wednesday it would not be prudent to invest in the Chukchi Sea now because of “evolving” federal regulations and permit standards, and it was unsure whether it would even be ready by 2015.

“We really don’t know yet,” said spokeswoman Natalie Lowman.

She said the company wanted to better understand the requirements from the government and other leaseholders before deciding. “We’re not putting a timeline on it.”

Conoco’s decision follows Royal Dutch Shell Plc’s announcement in February that it would not drill in Alaska’s Arctic seas this year after a 2012 season that culminated in the grounding of its drillship in a storm.

Just over a month ago ConocoPhillips said it was still planning two exploration wells in the Chukchi Sea next year, reassuring the public that the situation would be different from Shell’s.

In 2008, Conoco was awarded 98 exploration lease tracts in the Chukchi Sea. Previously, it held leases in the Beaufort Sea but has let those lapse, Lowman said. Shell had started drilling in both Arctic seas.

Conoco had spent about $500 million in the U.S. Minerals Management Service’s record-setting 2008 lease sale, second only to Shell’s $2.1 billion.

“Companies can’t be expected to invest billions of dollars without some assurance that federal regulators are not going to change the rules on them almost continuously,” said Lisa Murkowski, a Republican senator for Alaska.

The Devils Paw prospect, which Conoco had hoped to drill in 2014, also had minority partners Statoil and OOGC, a unit of China National Offshore Oil Company.

Houston-based Conoco will pursue the rest of its Alaska plans, including development of the CD-5 field, which is expected to be the first producing oilfield in the National Petroleum Reserve-Alaska on the western North Slope.

“We’re still on track for first oil at the end of 2015,” Lowman said.

Senator Mark Begich, a pro-drilling Alaska Democrat, said he was disappointed after spending four years working with the administration and industry to promote development of the Chukchi and Beaufort seas.

Yet groups seeking to stop or at least slow down Arctic offshore development applauded Conoco’s decision.

“We agree that the industry and federal government needs more time to figure out what the next steps should be,” Cindy Shogan, executive director of the Alaska Wilderness League, said in a statement. “The risks associated with drilling in the pristine Arctic Ocean are just too great.”

Marilyn Heiman, director of the Pew Charitable Trusts’ U.S. Arctic program, said that more time was needed to develop safety and oil spill prevention and response standards to protect the ecosystem and local communities.

But Rebecca Noblin, Alaska director at the Center for Biological Diversity, said there was “no safe way to drill for oil” in that particular environment and called on the U.S. government to take the opportunity to stop it.

The U.S. government is certainly having a very close look. Last month, it emerged that a fourth government probe was under way into Shell’s 2012 season - this time for possible violations of international marine environmental rules.

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