Developing Arctic resources requires relationships with local stakeholders, say panelists

By Kurt Abraham, Editor on 10/28/2016

ST JOHN'S, Newfoundland and Labrador -- At the Arctic Technology Conference hosted by the OTC group of associations earlier this week in St. John’s, Newfoundland and Labrador, one group of panelists discussed how the industry must engage local stakeholders, if they hope to develop frontier areas successfully. They all agreed that regulations, both international as well as domestic, play a key role in short- and long-term implications for oil and gas exploitation in any region. They discussed how it is both a challenge and an opportunity for operators and associated companies to show respect for people and the environment while also setting a clear path for safe, successful exploitation of assets in the Arctic.

“Without a doubt, working in the harshest environment requires operating at the highest level of safety,” said Scott Tessier, chairman and CEO of the Canada-Newfoundland and Labrador Offshore Petroleum Board. “We know that the industry is adjusting to the difficult market with cost-cutting, but there is a need to ensure that this cost-cutting does not adversely affect safety or environmental protection. Meanwhile, governments are working on stronger, modern legislation and regulations.”

Speaking from the local stakeholder point of view was Joseph Ahmaogak, chairman of the board of Olgoonik Corporation of the Village Corporation of Wainwright, Alaska. Wainwright is the second-most-northern community in the U.S. and North America. It also has been the village closest to the offshore Arctic leases in the Chukchi Sea. As an Alaska-native owned company, Olgoonik, on its own website, says that it has been maximizing Wainwright’s location as a central staging point for oil and gas exploratory operations on the North Slope. The company claims to have made significant investments in industry-required equipment, infrastructure and training programs. In addition to oilfield support, Olgoonik Corp. is involved in construction, logistics and operations, security, inspection services and environmental matters.

But don’t let that portfolio lead you to believe that the firm’s directors don’t have strong opinions on how oil and gas exploration should be conducted in the Arctic. “We deserve a strong voice and opinion, when it comes to Arctic exploration in our own backyard,” said Ahmaogak. “We are the ones who have to live with it. We believe in responsible development, but we are equally committed to respect for the environment. For instance, we are committed to the reduction of methane emissions in all phases of exploration and exploitation.”

An industry professional who has seen the positive and negative aspects of trying to conduct oil and gas operations in the Alaskan Arctic is Garth Pulkkinen, director of Technical Marketing for Noble Drilling. His firm was the contractor that provided MODUs for Shell’s Arctic campaigns offshore Alaska during both 2012 and 2015. Neither campaign, in the end, proved very satisfactory, and Noble’s ice-strengthened drill barge, Kulluk, ran aground along the Alaskan coast in late 2012 and had to be scrapped. Meanwhile, the Noble Discoverer drillship was contracted by Shell to back up Kulluk in 2012, as well as Transocean’s Polar Pioneer semisubmersible during 2015. Shell’s premature stoppage of its 2015 drilling campaign proved to be the Noble Discoverer’s last assignment. During last winter, Noble sent the vessel to Singapore and then decided to retire the unit.

“What people don’t realize is that there had been limited engagement of Alaskan natives in the workforce, prior to 2012,” said Pulkkinen. “Up to that point, OCS exploration was seen as a high-risk, low-reward proposition for coastal communities. Only through a step-change in relationship-building were certain hurdles cleared, that allowed drilling in 2012 and 2015.” And yet, an awful lot of effort was expended by Shell to drill just three wells during those two years. “We drilled two shallow, straight wells in the Chukchi Sea during four months of 2012,” continued Pulkkinen. But of course, the U.S. federal government did not allow Shell to drill those wells to their full, intended depths because the operator did not have a complete oil spill containment system fully deployed. And then, last year, Shell pulled the plug after drilling just one well to a 6,800-ft TD in about 150 ft of water. Shell said that it “found indications of oil and gas in the Burger J well, but these are not sufficient to warrant further exploration in the Burger prospect.” The well was sealed and abandoned.

Nevertheless, plenty of potential remains offshore Alaska, particularly in the Arctic, said Pulkkinen. “Consider the fact that Alaska is one-fifth the size of the entire Lower 48 of the U.S. And along the entire Alaskan coastline, most of the wells, 420 out of more than 500, have been drilled in the Cook Inlet. We’ve only drilled 33 wells in the Pacific basin, 30 in the Bering Sea, 30 in the Beaufort Sea, five in the early days of the Chukchi before 1991, plus the two top-hole sessions in the Chukchi and Beaufort in 2012, and last year’s well in the Chukchi. There’s a whole lot of potential left to be explored. Yes, with the activity in the Chukchi and Beaufort suspended, a lot of infrastructure that Shell brought along is gone. But this also offers an opportunity for another operator to come in later, build relationships with local constituencies and stakeholders, and make another attempt.”

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