Drilling advances

Many of you likely remember the Mukluk well that in 1982 “earned” the unwelcomed distinction of being the world’s most expensive dry hole. At a cost of more than $1 billion, the well was drilled from a manmade gravel island in the Beaufort Sea off Alaska’s North Slope, where it was found to have an empty reservoir that was largely blamed on a geological miscalculation. Or, as one engineer said at the time, “We were about one million years too late.”

More than three decades later, doubts continue over whether the purportedly gargantuan reserves in the Alaskan Arctic are worth the costs and hassles of accessing them, at least in the short term. As the U.S. Department of Interior (DOI) plans to unwrap its minimum standards for drilling in the Arctic by the end of the year, the general consensus is that regardless of the specific mandates, operators undoubtedly will be left with some serious cost-reward evaluations to consider before they think about moving rigs into northernmost Alaska.

In late September, yet another litany of recommendations was released as a non-related prelude to formal issuance of DOI’s standards. On Sept. 23, the independent non-profit Pew Charitable Trusts outlined what it would like the DOI to include in its Arctic drilling standards. While it would be easy to dismiss the report as so much hooey from one more group opposed to oil and gas development, Pew insists on its website that it is “not opposed to offshore drilling, but a balance must be achieved between responsible energy development and protection of the environment.” Pew, which is the beneficiary of trusts established by the children of Sun Oil Company founder Joseph N. Pew, insists that all it seeks is uniform, clear-cut standards for operating in the Arctic.

“There should be consistent standards in regulation that every company operating in the Arctic needs to meet,” Marilyn Heiman, director of Pew’s U.S. Arctic Program, told the Houston Chronicle. “It shouldn’t be discretionary, and it shouldn’t be what is recommended by the industry.”

There is nothing about the Pew recommendations likely to raise many eyebrows, as most believe they more or less mirror eventual DOI regulations:

• Rigs, support vessels and facilities should be built to withstand maximum ice forces and sea states that may be encountered.
• Equipment to control a spill, such as standby rigs for drilling relief wells and well-control containment systems, should be designed specifically for use in the Alaskan Arctic and stationed nearby for ready deployment.
• Spill response equipment should be located in Alaska’s Arctic and robust, to remove oil caught in ice-infested waters and trapped under ice.
• Redundant systems—including blowout preventers, double-walled pipelines, double-bottom tanks, and remotely operated controls—should be installed, as equipment and logistical access is unavailable for large parts of the year, due to harsh weather or ice cover.
• Arctic offshore drilling into hydrocarbon-bearing zones should be limited to periods when the rig and its associated spill response system are capable of working, and cleaning up a spill, in Arctic conditions.

Operators taking breathers. For the time being, operators with Arctic positions have decided to forgo any new drilling plans, at least through next year. Most seem to be following the lead of Shell Oil Co., which is taking, what it calls “a pause” in its Alaskan Arctic drilling program that already has cost upwards of $5 billion, and has been plagued with a host of equipment and operational problems. The operator’s Arctic misfortunes reached a head last New Year’s Eve, when its Kulluk conical rig ran aground off Sitkalidak Island, following its abbreviated drilling program in the Beaufort Sea.

In April, ConocoPhillips followed suit, saying it would suspend its 2014 plans specifically citing “uncertainties over federal regulatory and permitting standards.” Statoil North America plans to take an extended time-out, saying in July that it will not return to the Alaskan Arctic until at least 2020. “We do not anticipate any production from the Arctic in our production forecasts,” CEO Bill Maloney told Bloomberg. ENI and Repsol also have Alaskan Arctic holdings, but have yet to formally file for drilling permits.

In September, DOI Secretary Sally Jewell told Reuters, “I have not heard from any companies an urgency to go forward until they’re ready, and they are confident they can do it in a safe and responsible way,” she said in a news conference.

The DOI chief believes operators will return to the Chukchi and Beaufort Seas, despite competition from onshore shale. In the meantime, technology developers seem to agree that operators will find it difficult to ignore Arctic regions that, by some estimates, hold upwards of 25% of the globe’s undiscovered hydrocarbons.

More recently, ION Geophysical unveiled Narwhal, which it described as the first fully-integrated ice management system. The developer said the technology is designed to reduce risk and improve efficiency in seismic data acquisition and drilling operations, in or near ice.

According to ION, the Narwhal system enables operators to gather, monitor and analyze data from various sources, including satellite imagery, ice charts, radar, manual observations, and wind and ocean currents, to forecast weather and predict ice movements. With the ability to track, forecast and monitor potential ice threats, operators can make informed, proactive decisions to ensure the safety of people, assets and the environment, while minimizing operational downtime.