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Shell mulls options offshore Alaska

Dutch supermajor in September found no commercial opportunities in arctic waters.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |   Oct. 29, 2015 at 9:21 AM
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THE HAGUE, Netherlands, Oct. 29 (UPI) -- Despite regulatory and exploration setbacks for the arctic waters off the coast of Alaska, Royal Dutch Shell said it was keen on protecting its regional assets.

The U.S. Bureau of Safety and Environmental Enforcement in August awarded Shell with one permit to start drilling an exploration well into oil-bearing zones in the Burger prospect in the arctic waters off the coast of Alaska.

A federal study of the Burger prospect from 2004 described it as likely the largest reserve pool of its kind off the Alaskan coast

Last month, Shell said it found evidence of oil and natural gas in its Burger exploration well, but not enough to warrant further activity. A few weeks later, the Interior Department said it was canceling two potential lease sales in the region, saying it did not make sense to offer more opportunities for drillers "in light of Shell's announcement" on the Burger prospect.

The Bureau of Safety and Environment Enforcement also denied a Shell request to extend the expiration date of its leases in arctic Alaskan waters.

The company said the lack of exploration success, high costs and a challenging regulatory regime meant it was time to abandon the Alaska program for the foreseeable future. In its financial statement for the third quarter, however, Shell said it was interested in protecting at least some of its investments in the region.

"Shell's leases in the Chukchi Sea do not expire until 2020 and in the Beaufort Sea until 2017 and 2019," the company said. "We are considering our options in order to protect the remaining value of our assets and leases."

Shell's early efforts off the coast of Alaska were plagued by equipment issues. The company in July discovered a small breach in the hull of MV Fennica, chartered to carry the safety equipment to the Chukchi Sea. A drill ship slated for offshore Alaska, Noble Discoverer, suffered a series of setbacks during a 2012 campaign off the coast of Alaska.

The Dutch supermajor committed about $7 billion to the program. For the third quarter, Shell reported a loss of $7.4 billion, compared with a $4.5 billion profit during third quarter 2014.

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