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Natural Gas | Oil

Shell to resume oil and gas exploration in Alaska Arctic offshore

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Shell to resume oil and gas exploration in Alaska Arctic offshore

Highlights

To conduct drilling in 2024 and 2025

Company seeks partner to share risks, costs

Prospects near shore area, in benign ice environment

Anchorage — Shell plans to resume oil and gas exploration in Alaskan Arctic offshore waters for the first time since 2015, according to exploration plans filed with the state Sept. 17.

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The company seeks state approval to form an exploration unit covering 86,400 acres and 18 Alaska Beaufort Sea state offshore leases held by Shell. The company has committed to seismic and exploration drilling over the next five years in west Harrison Bay, which is in offshore the National Petroleum Reserve-Alaska and 34 miles northwest of the Colville River delta where the onshore Alpine field is now producing.

Shell said it has identified several prospects within the 18-lease group that could hold oil and gas accumulations. The company proposes updating seismic and geological data in 2022 and 2023, and conducting exploration drilling in 2024 and 2025.

The company has identified possible offshore extensions of the Nanushuck and Torok formations, which are productive onshore plays in the Colville River region where ConocoPhillip, Repsol and Oil Search, a company based in Papua, New Guinea, have made discoveries in recent years.

Shell was an active Alaska explorer and producer for decades until it withdrew from the state in 2015 after a costly and unsuccessful exploration program in the Chukchi Sea, an area off the northwest Alaskan Arctic coast.

The western Harrison Bay area, while remote, is in a more benign ice environment than the company faced in other parts of the Beaufort Sea.

Shell acquired the Harrison Bay leases in a 2012 state offshore auction, but the leases are approaching the end of 10-year terms allowed by the state. An exploration unit allows the leases to be extended for five years in return for a definitive timetable for exploration drilling.

The company is seeking a partner to share expenses and risks, it said in its filing.

"Shell had made solid progress toward the partnership objective prior to the COVID-19 pandemic and resulting collapse in oil prices," the company said in its application. "While oil projects on the North Slope remain attractive from the standpoint of geologic potential and the fiscal assumptions that are expected to prevail in the coming decades, the economic uncertainty resulting from the collapse of oil prices has negatively impacted Shell's ability to negotiate a commercial agreement with a potential partner."

Shell could not be reached for comment.

Shell has long had a strategic interest in Alaska.The company in 2013 drilled an offshore exploration north of the Point Thomson field, a large gas and condensate discovery by ExxonMobil and BP that is now producing. In the 1980s Shell also explored the central Beaufort Sea and discovered Northstar, a producing oilfield six miles offshore Prudhoe Bay now owned by independent Hilcorp Energy.

The Chukchi Sea program was extremely costly for Shell. The company spent over $6 billion to acquire leases and conduct exploration over several years, but faced stiff opposition from conservation groups and complications with federal regulatory agencies. After an initial well had disappointing results in 2013 the company shelved the program.