Shell Beaufort and Chukchi Sea Program Update Pete Slaiby Vice President, Shell Alaska January, 2011 1
Beaufort Sea Leaseholders 2
Chukchi Sea Leaseholders 3
Alaska OCS - Benefits To Alaska and the Nation 35,000 jobs each year for 50 years of project life* Amounts to $72 billion in payroll* Extends the life of Trans-Alaska Pipeline (now two thirds empty) Opens up stranded resources in National Petroleum Reserve Alaska (NPRA) Gas reserves for gas line to Lower 48 states Domestic energy security * 2009-Northern Economics & Institute for Social and Economic Research, Univ. of Alaska 4
Barrels per Day (in millions) The Future of TAPS 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2007 2012 2017 2022 2027 2032 2037 2042 2047 2052 2057 Year Baseline OCS Increment 5
2011 Proposed Program 6
Shell In Alaska Today 137 Beaufort leases - $84M 275 Chukchi leases - $2.1 Billion Chukchi Sea 275 Leases Beaufort Sea 137 Leases Total investment to date: $3.75 billion Trans-Alaska Pipeline Hundreds of millions with Alaskans /offshore service providers Conservative estimates: 25 billion barrels of oil and 120 TCF of gas in Alaska Arctic (mean estimate) Most material OCS hydrocarbon outside of Deepwater GOM OCS Exceeds east/west coast OCS resources combined 7
Chukchi and Beaufort Seas Crackerjack SW Shoebill Burger Harrison Bay Camden Bay 8
2011 Proposed Operations Drill offshore wells in Beaufort Sea during open water drilling season (July-October) Shallow hazards surveying (future drill site clearance) Ecological science data gathering (offshore and onshore) Offshore ice gouge surveying & geotech soil sampling to support needed infrastructure technology Marine mammal monitoring supporting operations The Noble Discoverer anchored in Dutch Harbor, Alaska in 2007 9
Issues for 2011 Drilling Regulatory/Litigation Hurdles Shell Application for Permit to Drill (APD) Before BOEM Arctic suspension lifted on Dec. 1 st when Administration allows Shell to pursue limited program Dec. 30 th EAB Remands Shell Air Permits Back to EPA 5 years and $50 million invested to date Shell emissions will have no practical impact onshore Delay and new regulations a serious threat to 2011 drilling Lawsuits Based on ESA Shell 2011 Go/No-Go Decision Forthcoming 10
Oil Spill Contingency Planning 11
Shell Three-Tier Oil Spill Response Offshore Vessels OSRV (Nanuq) Arctic Tanker Work boats Vessel of Opportunity Nearshore Vessels Barge Work boats Skimming vessel Mini barges Onshore Vessels landing craft and utility vessels Booms Skimmers & Pumps Skimmers & Pumps Booms Booms Misc Equipment Storage and tools Misc Equipment Decon connex Workshop/Tool connex 12
Oil Spill Contingency Plan Support State and Federal Standards reviewed and approved World class Contingency Plan reviewed by BOEM, EPA, US Coast Guard, FWS, NMFS, North Slope Borough Worst Case Discharge Scenario for 2011 significantly lower than required Response Planning Standard Shell response capabilities exceed required Response Planning Standard SINTEF (oil in ice research) study and trials 13
Changes to Shell s Arctic Program 14
Commitments BOP testing and enhancements Testing every 7 days instead of every 14 days Use of second set of shear rams Sub-sea remote operating panel relocation ROV/Diver options on and near site Second rig relief well capability 15
Proposed Sub-sea containment system development Flare Boom Gas/Liquid Separator System to capture and recover hydrocarbons from well control incident Multi-Phase Hose Pinch Valve Hydraulically powered pump Oil/Water Separator Water Outlet Overboard Temp Oil Storage Support Vessel Will be ready for 2011 Season Containment Dome Leak Mooring Line Anchor Containment and Recovery Concept 16
Normal Pressure Near Normal Pressure High Pressure Very High Pressure
Considerations for Path Forward 2011 Drilling: Timelines remain critical. Investment won t continue beyond January 2011 without high drilling confidence Lease Sale 193 Alaska Federal Court Remand: Supplemental Environmental Assessment rests with BOEM awaiting submittal to Court. 18
Stakeholder Solutions 19
Stakeholder Solutions Finding common ground with the people of the North Slope Over 400 meetings with stakeholders since 2006 Incorporating feedback: air permit,discharge,drilling blackouts during whaling in Beaufort Sea Revised program reflects our social performance goal: Minimize impacts to people and the environment where we work 20
Baseline Science Supports Exploration In Alaska $500 Million and growing (Shell $50M) 5000 independent scientific studies since1973 5 years of marine mammal monitoring Tagging studies walrus and seals First air quality station in OCS Beaufort Ongoing offshore, nearshore, and onshore ecological characterization studies Traditional knowledge studies Health impact assessments Up to $5 million annual science initiative with North Slope Borough 21