Royal Dutch Shell plc's window to drill in Alaska's offshore this summer is narrowing as it awaits federal approval for its oil spill containment barge, which would be moored near two drillships.

BP plc has scuttled a cutting-edge drilling project in the shallow waters of Alaska's Beaufort Sea after an internal review concluded that the endeavor should not go forward as designed.

Following years of development, Liberty was launched in 2008 (see Daily GPI, July 16, 2008). BP originally budgeted $1.5 billion to tap the hard-to-reach reservoir on the Outer Continental Shelf about six miles off Alaska's northern coast using horizontal drilling techniques that were working so effectively in unconventional onshore plays.

Because of its remote location, Liberty for years had stymied development efforts by the oil major, but drilling technology refinements able to pierce up to eight miles of shales and siltstone were expected to make the project viable. BP operates several oilfields offshore Alaska, but Liberty was to be the first oilfield off the state's coast exclusively in federal waters.

The startup already was behind schedule; Liberty was to ramp up in 2011 at around 40,000 boe/d with an estimated yield of around 100 million boe. However, the project for now has been shelved.

"We are not going to pursue Liberty in its present form," said BP Exploration (Alaska) Inc.'s Dawn Patience. "The project, as it's designed right now, doesn't meet BP's standards."

According to BP's internal review, Liberty's extended-reach horizontal drilling design plan would have cost "a lot more" than the $1.5 billion budgeted. BP officials now are seeking to redesign Liberty, a Bureau of Ocean Energy Management (BOEM) spokesman said.

The horizontal drilling plan was submitted to regulators five years ago but Liberty has been on the drawing board for much longer. A 1998 plan was put aside in 2002 following an environmental impact statement that indicated drilling costs would be a concern.

The current plan first was submitted to the BOEM predecessor Minerals Management Service in 2007. Liberty was to be developed from shore using extended-reach horizontal wells that targeted the reservoir up to eight miles away. Liberty was to be drilled and processed from BP's Endicott platform facilities in the Beaufort. Once the project was given federal approval, BP sanctioned the project in 2008 and construction work to accommodate the development began in 2009.

However, after BP's Macondo well exploded in the deepwater Gulf of Mexico in April 2010, federal offshore drilling sanctions were imposed. Regulatory changes led BP to again scrutinize Liberty, which resulted in the 18-month internal review of the project.

Meanwhile, Royal Dutch Shell plc's plan to drill in Alaska's Chukchi and Beaufort seas appears to be delayed again as the producer attempts to obtain final regulatory approval for its mandatory oil spill response vessel. Shell's Alaska drilling plans also were thrown into additional delays following the Macondo well blowout.

With the Alaska offshore drilling start dates too numerous to mention, a Shell official in April had said the producer was penciling in September to launch a campaign offshore (see Daily GPI, April 30; March 29). Shell already has a majority of permits in hand and two Shell-chartered Noble Inc. drilling ships are at the ready to begin drilling (see Daily GPI, May 25).

However, Shell officials still are working with U.S. regulators to ensure that the Arctic Challenger, the chartered oil spill containment barge, is prepared. Final U.S. Coast Guard approval has not been received to date; the barge is undergoing a "series of inspections to ensure its readiness for deployment," according to Shell. Shell also is working with the Coast Guard to define the operational and mooring standards of the "first-of-its-kind system," which is not yet mandated by federal rules.

Shell also continues to face a plethora of litigation challenges, the latest one filed in Alaska on Monday, that seek to overturn the Department of Interior's decision to approve the company's oil spill cleanup plans.

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