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Shell Resurrects Arctic Drilling Plan

A unit of Royal Dutch Shell plc late Wednesday submitted a plan of exploration (POE) that details a proposal to drill exploratory wells in the Camden Bay, AK, area of the Beaufort Sea beginning in 2012.

The formal submission by Shell Oil Co. to the Bureau of Ocean Energy Management Regulation and Enforcement (BOEM) specifically targets the shallow waters of Camden Bay, about 150 feet deep, and restarts the regulatory process needed to begin summer drilling as soon as ice clears in the summer of 2012, the producer said. A separate POE is to filed for the Chukchi Sea in the coming days.

"We believe the conversations we are having with regulators and government officials are more positive in view of the safeguards we have put in place, even prior to the Macondo incident," said Shell Alaska Vice President Pete Slaiby. "As a result, we are cautiously optimistic we will be allowed to pursue a multi-well drilling program in 2012 as we have always planned."

Shell's Beaufort and Chukchi Sea POEs are to include drilling multiple wells in both basins; up to four wells over two years in the Beaufort Sea and up to six wells over two years in the Chukchi Sea.

The drilling programs would be executed using up to two drillships, one potentially in each sea; allowing Shell to begin to exploring its Alaska prospects in parallel after five years of delay, according to the POE.

"Shell has taken extraordinary steps to build confidence around our exploration programs," a spokesman said. "We stand ready to deploy the most robust Arctic oil spill response system known to industry and, in accordance with the BOEM's requirements, Shell has shown that our oil spill response capability exceeds our calculated worst-case discharge volume for the wells being proposed."

In addition, Shell said it was committed to fabricating an oil spill capping system to capture hydrocarbons "at the source in the extremely unlikely event of a shallow water blowout. The capping system will remain staged in Alaska to allow for rapid deployment."

The producer also plans to use "world-class technology and experience to ensure a safe, environmentally responsible Arctic exploration program -- one that has the smallest possible footprint on the environment and no negative impact on North Slope or Northwest Arctic traditional subsistence hunting activities. We look forward to drilling in 2012 and validating what we believe is a valuable national resource base."

Shell originally planned to drill its first Beaufort well this summer but it dropped the proposal earlier this year after two required air quality permits were revoked by the Environmental Appeals Board (see Daily GPI, Feb. 4; Jan. 5). The board faulted the Environmental Protection Agency for not reviewing fully the potential emissions from a drillship and support vessels.

Shell last year had come close to completing the required permit applications but fallout from last year's Macondo well blowout in the Gulf of Mexico stalled those plans.

Shell's refiling has been expected and was discussed recently at the Offshore Technology Conference in Houston. BOEM Director Michael Bromwich told reporters on Monday "spill response is really the toughest issue in the Arctic." Drilling in the Arctic has always been in shallow waters and under lower pressures, but he said "spill response is a question."

"Shell is going to be under pressure to demonstrate that it has adequate spill response capabilities to deal with a potential blowout in the Arctic," he said.

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