Feds Consider New Chukchi Sea Leases

By Tim Bradner, Alaska Journal of Commerce, Anchorage

Oct. 16–The petroleum industry may be headed back into the frigid, ice-choked and very remote waters of the Chukchi Sea off Alaska’s northwest coast. The U.S. Minerals Management Service said it will conduct an Outer Continental Shelf lease sale in the Chukchi sometime in late 2007 or early 2008.

John Goll, the agency’s Alaska region director, told the Resource Development Council Oct. 6 that MMS will begin scoping sessions in Alaska communities next spring, the first step in preparing an environmental impact statement. The sale has been designated OCS Sale 193.

Nearshore areas that are habitat for bowhead whales, important to coastal Eskimo communities, will not be included in the acreage to be leased, Goll said.

MMS previously leased the Chukchi region in OCS sales in 1988 and 1991. The region is far from any infrastructure and moving ocean pack ice imposes difficult conditions for drilling and challenges for development of any oil or gas discovered.

Shell drilled three costly offshore exploration wells, finding gas in one well — its Burger prospect drilled in 1990 — and indications of hydrocarbons in other wells. Given the remote location, the gas discovery at Burger was not economic.

However, Burger may turn out to be larger than what was believed earlier.

What has re-sparked industry’s interest is a re-evaluation last year by MMS of geologic and reservoir data from the Burger well that led to a new resource estimate of 14 trillion cubic of gas in place, Goll told the RDC.

The current MMS five-year program has a provision where sales can be held in the Chukchi and Norton basins off Western Alaska if local communities and industry show interest, he said. This allows a sale in these areas to be held within the agency’s current five-year plan. Without the provision, the sale would have to be scheduled in the next MMS five-year sale plan, resulting in a delay of several years, Goll said.

If the sale goes ahead it will create opportunities for Alaska contractors and consultants in working with any companies winning bids, he said.

Few companies have been interested in frontier areas like the Chukchi in recent years because of the remoteness, difficult offshore ice conditions and costs of supporting exploration and production.

There was a flurry of interest in many of the remote frontier OCS areas in the 1980s, and wells were drilled in the Norton Basin south of the Seward Peninsula in Western Alaska as well as the Navarin Basin, a remote region of the Bering Sea.

No commercial discoveries were made and industry’s interest faded after oil prices collapsed in 1986, ushering in a period of low prices.

The current five-year lease sale plan ends in 2006, and MMS has just started its preparation for the following 2007-2012 plan. The agency is soliciting comments and suggestions for the sale plan, Goll told the RDC.

Except for some parts of the Gulf of Mexico, Alaska’s offshore is the only OCS region in the United States that are not under congressional or presidential moratoriums on leasing, Goll said.

All of the potential OCS sale areas off Alaska are being considered, he said. This includes the North Aleutian Shelf region, an area off Bristol Bay where fishermen, coastal communities and the state of Alaska opposed leasing in the 1980s. A federal OCS sale was held in the North Aleutian Shelf but the government wound up repurchasing leases from the companies that bid in the sale. The area has been off-limits to leasing since.

Goll told the RDC that while the congressional moratorium on leasing in the North Aleutian Shelf has been lifted, a presidential moratorium is still in effect. Even though leasing cannot take place until the president lifts the moratorium, the MMS will still include the region in its review of possible Alaska sales, Goll said.

The area is highly prospective for oil and gas. A state oil and gas lease sale is planned Oct. 26 for state-owned submerged lands inside the three-mile Alaska territorial limit as well as onshore lands along the Alaska Peninsula and around Bristol Bay.

Goll said the MMS as well as the Kenai Borough were disappointed that no companies expressed interest in lower Cook Inlet federal OCS acreage when the agency held a lease sale in May 2004, and again when the MMS solicited industry interest last December. The 2004 sale was OCS Sale 191. The second sale, which was suspended in December, was Sale 199.

In November, the MMS will again ask if there is any industry interest in the area. If companies respond positively, the delayed Sale 199 can be held in May 2007, he said. If there is no response in December Sale 199 will be canceled.

If that happens the lower Cook Inlet sale will have to be scheduled on the next five-year OCS sale plan and much of the environmental review will have to be repeated.

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