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Eni Wins BSEE Approval, Could Begin Beaufort Sea Drilling in December

Starting next month, a subsidiary of Italy's Eni SpA could begin drilling up to four exploratory wells from an artificial island in the Beaufort Sea, after the Interior Department's Bureau of Safety and Environmental Enforcement (BSEE) approved the company's application to drill.

On Tuesday, BSEE said Eni US Operating Inc. will be allowed to move forward with its exploration activities in federal waters, but only after engineers and inspectors from its Alaska Region conduct pre-drill inspections on Spy Island, one of four oil- and gas-producing artificial islands in the shallow waters of the Beaufort Sea.

"BSEE Alaska Region staff conducted a thorough and complete review of Eni's well design, testing procedures and safety protocol," said BSEE Alaska Region Director Mark Fesmire. "Exploration must be conducted safely and responsibly in relation to the Arctic environment and we will continue to engage Eni as they move forward with drilling its exploratory well."

BSEE said it's the first time in more than two years that Arctic exploration operations on the Outer Continental Shelf (OCS) had been approved. A sister agency at Interior, the Bureau of Ocean Energy Management (BOEM), approved Eni's plans last July.

BSEE added that Eni is proposing to use extended-reach drilling techniques to drill into federal submerged lands. Specifically, Eni will target a formation in the newly formed Harrison Bay Block 6423 unit, a 13-lease unit on the OCS that BSEE approved in December 2016. The agency said Eni will explore the Harrison Bay Block 6423 Unit in partnership with Royal Dutch Shell plc, and plans to drill two exploration wells plus two potential sidetracks over the next two years.

Eni currently has production facilities at Oliktok Point and on Spy Island, which is three miles offshore. The facilities include 18 producing wells, 13 injector wells and one disposal well. The company said exploratory well operations will add 100-110 jobs. Depending on the drilling results, Eni said new development in the region could lead to the creation of an additional 100-150 jobs and new production of 20,000 b/d.

"Responsible resource development in the Arctic is a critical component to achieving American energy dominance," said BSEE Director Scott Angelle. "BSEE is committed to working with our Alaskan Native and industry partners by taking a thoughtful and balanced approach to oil and gas exploration, development and production in the Arctic."

Eni acquired 104 exploration leases in northern Alaska from Armstrong Oil & Gas for an undisclosed amount in 2005. At the time, the company said the leases held more than 170 million boe. Last July, Eni's website said the company held interests in 43 exploration and development blocks in Alaska, and that Eni was the operator for 27 blocks.

BSEE said its Alaska Region personnel, working in coordination with the State of Alaska, oversee oil production from Northstar Island, a second artificial island in the Beaufort. Production from Northstar Island is currently about 10,000 b/d, the agency said.

Nearly two years ago, a subsidiary of Hilcorp Energy Co. proposed building a fifth artificial island in the Beaufort, which would be called Liberty Island. It would be located about 15 miles east of Prudhoe Bay, in Foggy Island Bay. BSEE said BOEM is currently taking public comments for the Liberty Island project, and if approved would be the first completely federal OCS production facility in the Alaska Region.

The other two artificial islands in the Beaufort are Endicott and Oooguruk islands. Endicott and Northstar islands were completed by Alaska Interstate Construction LLC in 1987 and 2000, respectively, and were subsequently used by units of BP plc and Hilcorp to produce North Slope oil, targeting the Endicott and Northstar oilfields. Hilcorp purchased all of BP's interests in Endicott and Northstar in 2014.

Meanwhile, Pioneer Natural Resources Co. completed Oooguruk Island in 2008, and then sold its Alaska unit to Caelus Energy Alaska LLC in 2013. Oil began to flow from Spy Island in 2011.

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