EXPLORATION:

To prepare for its turn in the Arctic, ConocoPhillips stays out of rough waters

ANCHORAGE -- Earlier this month, ConocoPhillips' Arctic drilling team began real-time planning for oil exploration in Alaska's Chukchi Sea.

Working from a state-of-the-art central control room in the company's downtown offices, the experts are using satellite feeds to monitor ice conditions at ConocoPhillips' Devils Paw prospect. They're tracking daily Arctic weather conditions and mapping the logistics of shipping equipment and personnel to offshore facilities.

But despite the intensive activity, the company is not physically sending a drill rig to the Arctic.

The control room operations are part of virtual drilling exercises that ConocoPhillips has conducted during every Arctic open water season since 2010. The aim is to help company planners prepare for next summer's proposed Chukchi Sea oil exploration operations.

During this year's dry run, ConocoPhillips is expanding its exercise to include its many outside contractors. Company officials also hope to include Native communities adjacent to the drilling operation in the drilling simulation.

"We're hoping to mitigate for any impacts," Mike Faust, Chukchi program manager for ConocoPhillips, said early this month at the National Oceanic and Atmospheric Administration's Arctic open-water meeting. "I'm still working through the details in my mind on how we're going to practice this with the communities this summer."

The rewards for the company's long-term planning operations could be immense. The Interior Department estimates that the Chukchi Sea holds 12 billion barrels of recoverable oil.

ConocoPhillips is the latest oil giant to take the lead in the expensive race to tap America's Arctic offshore oil resources. No oil company has explored in the region since the 1980s and early '90s, when 30 offshore wells were drilled in the Beaufort Sea and five in the Chukchi. All of the wells were abandoned when world oil prices plummeted.

Last year, Royal Dutch Shell PLC planned to sink wells in the Beaufort and Chukchi seas. But equipment failure and technical glitches prevented the company from securing federal clearance to drill into the oil-bearing rock at either site.

Shell recently sent its two drill rigs to Asia for repairs and is hoping to renew oil exploration in 2014 (EnergyWire, Feb. 28).

Now ConocoPhillips is in the spotlight. Company officials at the Anchorage meeting said that they intend to submit an exploration plan for the Chukchi Sea project to the Bureau of Ocean Energy Management in the next few weeks.

But ConocoPhillips faces several important hurdles.

For one, some Native communities are raising concerns about the drilling operation's impacts on caribou and whale hunting, which is a key part of their subsistence lifestyles.

ConocoPhillips is also being targeted by national environmental groups and Native Alaskan organizations that want more information about the company's Arctic oil spill response plans (EnergyWire, March 26).

That debate centers in part on whether federal regulators will require ConocoPhillips to have access to a backup rig in case of a blowout at the Chukchi Sea drilling site. ConocoPhillips said in a statement Monday that the company is "working to identify a relief rig" for the 2014 drilling project.

Meanwhile, a coalition of 11 green groups has called on the White House to suspend oil development in Alaska's northern waters and conduct a thorough review of all drilling operations in the Arctic.

The coalition, which includes the Sierra Club, the Alaskan Wilderness League and Greenpeace, also wants the Obama administration to adopt tougher operating standards for Arctic development.

Equipment 'that's meant to work in the Arctic'

The Devils Paw project, named after a mountain peak near Juneau, would not be ConocoPhillips' first venture into the Arctic.

The company, Alaska's largest oil producer, is already operating the lucrative Alpine and Kuparuk fields on the North Slope. It is also beginning work on two prospects in the Alaska National Petroleum Reserve.

"We've been actively exploring on the North Slope for well over 40 years," Faust noted.

For its Chukchi prospect, ConocoPhillips has ordered a new Noble Corp. jackup rig that will be fitted with movable legs that extend to the ocean floor and can raise the hull above the ocean surface before drilling begins.

Describing ConocoPhillips' new equipment, Faust took a subtle swipe at Shell's refurbished drill rigs, which have suffered repeated operating failures over the last year.

"We're not going to bring up a 30-year-old piece of equipment," he said. "We're bringing up state-of-the-art, new stuff that's meant to work in the Arctic."

Although built for harsh environments, the jackup rig would have to be moved off the well site if ice floes approach the region.

ConocoPhillips is pinning its hopes on finding oil at its Devils Paw prospect, a 200,000-acre region located about 120 miles west of the Native village of Wainwright. ConocoPhillips is already building onshore facilities in the village to carry workers to and from the rig and support vessels and to provide supplies for the fleet.

If the company is able to secure its federal permits, Faust said, it hopes to drill one or two wells at the Chukchi Sea site in 2014.

The company estimates that a single well would take roughly 30 to 40 days to complete. Historic records show that the area has an average of 100 to 120 days of open water each summer.

"We've drilled this well on paper now the last three years in a row," Faust said.

"Over the last three years, even though last year was a significant ice year, we were able to drill two wells at our location within the open water season," he said. "We've learned a lot."

But critics warn that things don't always go according to plan, as Shell discovered last year.

"It's good that you're [planning] it on your computers," George Edwardson, a resident of Barrow, told Faust at the Arctic meeting.

"But it's going to be a lot different when you actually go out there and start drilling. You need to know that if you do proceed with your drilling, there will be impacts," he said. "We all know that."

Resistance

As ConocoPhillips gears up for the 2014 drilling season, the company has encountered resistance from residents of Kivalina, a small Native village located on a barrier island along the Chukchi Sea.

For more then a decade, Kivalina's 425 residents have endured some of Alaska's worst effects of climate change, with intense storms, melting permafrost and accelerating erosion destroying coastal homes and washing away the ground under their feet.

Now ConocoPhillips is eyeing an offshore site near Kivalina as an emergency staging area for the company's massive jackup rig. Some village residents fear that the increased industrial activity will scare away marine life and seriously impair the community's subsistence way of life.

"If you impact the mammals, it'll make it harder for hunters to provide for their families," Colleen Swan, a member of the Kivalina City Council, warned at the Arctic conference. "If you continue to have an impact on our ability to feed our families, there is going to be a fight."

ConocoPhillips' preliminary plans called for its jackup rig to be hauled on a heavy lift vessel to the Kivalina staging area. The site has a shallow, hardrock seafloor substrate that would be strong enough to temporarily set up and store the rig.

But after community residents objected, ConocoPhillips agreed to use the Kivalina staging site only if ice or storms prevent the rig from being hauled all the way to the Chukchi well site.

"The rig is coming from Singapore," Faust noted. "It takes about 23 days to get here."

"If there is a storm or something and the ice blocks the Bering Strait or we can't get all the way to our drilling location, there is the possibility that we would need to offload the rig someplace before that," he said.

"We're doing everything we can to make sure that we don't have to do that, but we do need that option."

ConocoPhillips is also working with the village of Wainwright, population 550, which will serve as a land base for the company's 2014 offshore drilling operation. The bulk of the support vessels and other traffic will remain 100 miles off shore.

Faust said Wainwright residents want the company to limit the helicopter, airplane and boat traffic near the town to avoid affecting local marine life, which is a key source of food for the community.

"They said they really would rather that the helicopter traffic not be right through town," he said. "So we built a road 4 miles out of town and put our pads out there."

The oil company housing and air transportation facilities are being built by Wainwright's profit-making arm, the Olgoonik Corp. (EnergyWire, Nov. 2, 2012).

For ConocoPhillips, the next year will be a time for the oil giant to navigate the rough technical and political waters around Arctic development. For the oil industry, ConocoPhillips' offshore drilling plans represent a second chance to push into the American Arctic after Shell's disappointing venture.