Arctic aspirations

March 2, 2012

In a world where two things are certain – death and taxes – Arctic exploration does offer a certain amount of certainty: just a little bit of information can completely alter the way the industry views a specific Arctic area. Industry leaders gathered in Houston last month for the inaugural Arctic Technology Conference and Jennifer Pallanich listened in.

Don Gautier, resource geologist with US Geological Survey (USGS), said just a little information about the region can fully change a company's view of it. ‘There is an extraordinary amount of certainty, anywhere we look in the Arctic.'

Getting to the point where an operator can obtain that information may take a certain amount of jumping through hoops. ‘The regulatory timeframe that it takes to get things done is an issue for us,' said Mike Peacock, exploration manager for ExxonMobil Canada and Imperial Oil. ‘It's very important that the regulators talk and that we get global standards to work within.'

David Lawrence, EVP for Shell Upstream, noted Shell has struggled to obtain permits for its Arctic exploration efforts. ‘The big challenge is to be able to drill a single exploratory well,' Lawrence said. The company is focused on putting together blueprints for an expanded Arctic exploratory program next year, he added. Before the drilling can happen, he warned, ‘urgent action' in regulations must occur first. ‘We're happy to work with the regulators' on permitting issues, he added.

Public perception about the oil & gas industry, particularly after BP's Macondo well spilled nearly 5 million barrels of oil into the Gulf of Mexico last year, is another concern.

‘Oil & gas is often viewed as a threat, not as an opportunity, by residents of the Arctic,' said Mark Shrimpton, senior associate for socio-economic services at Stantec Consulting. ‘Even economic development professionals have a profoundly negative outlook on our industry.'

For quite some time, he said, Newfoundland and Labrador was a ‘have-not' province with low levels of education and high rates of unemployment. Then, ‘in the late 1970s, the government decided to intervene as best it could to harness the potential of the oil & gas industry and moved forward with a variety of projects' such as Hibernia and Hebron. The oil industry has had far-reaching effects in the region, Shrimpton said, including higher incomes and investment in infrastructure, education, training and research and development. ‘It really has been a transformation.'

Access in other areas in the Arctic will require overcoming negative stereotypes and expectations, he added. Any plans for projects in the Arctic ‘have to be context-specific. There is no one-size fits all,' Shrimpton said.

Derrick Dalley, minister of business for Newfoundland and Labrador, said the province aims to be a ‘gateway to the north' by providing a location that meets the industry's needs.

According to the USGS, the Arctic accounts for 22% of the world's undiscovered but technically recoverable reserves. The Arctic holds an estimated 90 billion barrels of oil, 1670tcf of gas and 44 billion barrels of natural gas liquids, the USGS said in a 2008 report. Only half of the Arctic's 19 basins have been explored.

Marc Blaizot, SVP for geosciences at Total, noted the frontier area of the unexplored Arctic is five times the size of Texas. There are many Arctic basins that are ‘totally virgin', he said. So far, about 80% of the hydrocarbons found in the Arctic is gas. ‘Why so much gas? Can we find oil? And where? Why are Arctic basins so much gas-bearing?' he asked. Prudhoe Bay, of course, is oil-bearing and serves as what Blaizot calls the exception that proves the rule.

‘I think deepwater [Arctic] exploration will start in the US and Canada,' Blaizot said. ‘North of the Beaufort Sea is the key area to start.' Drilling there, he cautioned, would be difficult and expensive as it would take several operational seasons to meet drilling objectives. That could bring drilling costs to perhaps $200 million per well, he added. ‘Exploration will be difficult, certainly, because of environment and environmental constraints.'

Spanning the seasons
Bill Scott, manager of Chevron Canada's Arctic Center, noted many wells in the Arctic offshore cannot be drilled in a single season, which can vary from a 60 day operating window to 180 days. ‘Many of the wells took two seasons to drill because they were spud late in the season,' he said. In fact, Scott added, some of the wells took three drilling seasons to complete. The length of time it takes to drill a well is a key concern, especially when it comes to relief wells.

‘If you can't drill a well in one season, you certainly can't drill a relief well in one season,' Scott said. In 1976, the Canadian government put in place the Same Season Relief Well provision that required any operator to prove that if a well had a blowout, the operator could complete a relief well in the same season. ‘We're beginning to question whether the relief well is the best method,' he said. ‘Same Season Relief Well implies that the only solution is a relief well.' There are other methods for killing a well, he added.

The length of the open water season, the pack ice severity and the major ice features all affect the drilling conditions. Ice-strengthened rigs that can drill in the Arctic regions are costly, he added, and need to be kept busy in other regions of the world when the open water season ends. However, these rigs must compete with less expensive rigs for work, and mob and demob costs add up, he added.

‘This is what drives well costs to huge numbers.'

Another factor, he noted, is how often rigs must disconnect because of ice. ‘As an industry, we've always been able to disconnect quickly.' The hitch, he added, is how long it takes to reconnect; this time decreases drilling efficiency levels. OE



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