Polar bear

The final frontier for oil and gas exploration

The Arctic region has long been viewed as a huge resource for oil and gas but the harsh conditions and tricky economics have made it unappealing, but as E&T reveals that is now changing.

The Earth has been plundered from the Gulf of Mexico to the North Sea, from Venezuela to the Arabian Peninsula, in an attempt to satiate our thirst from oil. But demand grows and traditional reserves are being expended.

So attention is now turning to the Arctic Circle, which circumscribes about 6 per cent of the earth's total surface and is one of the last regions of any significant size to be explored for oil.

It has long been known that the region is rich with oil and gas reserves but the high cost of extracting the precious resources from such an inhospitable and unforgiving climate have made it off limits. But that is changing.

More specifically, the focus now is upon offshore resources in the Arctic Circle, in continental shelves under less than 500m of water. Onshore areas in the region have already been explored, with some 40 billion barrels of oil (BBO), 1,136 trillion cubic feet of natural gas, and 8 billion barrels of natural gas liquids having been developed, primarily in the West Siberian Basin of Russia and on the North Slope of Alaska. Deepwater basins in the Arctic Circle are considered weak prospects as they lack the appropriate source rock structures.

But the real dilemma is exactly how much untapped oil is there in the region?

In an effort to answer this question, the United States Geological Survey (USGS) in cooperation with an international group of geological experts from Canada, Demark, Greenland, Norway, Russia and other governmental agencies have just completed an effort to round up the available data on the Arctic region and assess its potential, known as the Circum-Arctic Resource Appraisal (CARA).

The area north of the Arctic Circle has an estimated 90 billion barrels of undiscovered, technically recoverable oil, 1,670 trillion cubic feet of technically recoverable natural gas, and 44 billion barrels of technically recoverable natural gas liquids in 25 geologically-defined areas thought to have potential for petroleum.

The US Geological Survey assessment was the first publicly available petroleum resource estimate of the entire area north of the Arctic Circle. According to the report, these resources account for about 22 per cent of the undiscovered, technically recoverable resources in the world. The Arctic accounts for about 13 per cent of the undiscovered oil, 30 per cent of the undiscovered natural gas, and 20 per cent of the undiscovered natural gas liquids in the world. About 84 per cent of the estimated resources are expected to occur offshore.

Worldwide USGS study

'Before we can make decisions about our future use of oil and gas, and related decisions about protecting endangered species, native communities and the health of our planet, we need to know what's out there,' USGS director Mark Myers says. 'With this assessment, we're providing the same information to everyone in the world so that the global community can make those difficult decisions.'

Of the estimated totals, more than half of the undiscovered oil resources are estimated to occur in just three geologic provinces - Arctic Alaska, the Amerasia Basin and the East Greenland Rift Basins. On an oil-equivalency basis, undiscovered natural gas is estimated to be three times more abundant than oil in the Arctic. More than 70 per cent of the undiscovered natural gas is estimated to occur in three provinces - the West Siberian Basin, the East Barents Basins and Arctic Alaska.

Technically recoverable resources are those producible using currently available technology and industry practices. For the purposes of this study, the USGS did not consider economic factors such as the effects of permanent sea ice or oceanic water depth in its assessment of undiscovered oil and gas resources. The USGS is the only provider of publicly available estimates of undiscovered, technically recoverable oil and gas resources.

Exploration for petroleum has already resulted in the discovery of more than 400 oil and gas fields north of the Arctic Circle. These fields account for approximately 40 billion barrels of oil, more than 1,100 trillion cubic feet of gas and 8.5 billion barrels of natural gas liquids. Nevertheless, the Arctic, especially offshore, is essentially unexplored with respect to petroleum.

The question as to whether or not exploration and production should be allowed in these virgin wildlife habitats is an argument that has raged for decades, both offshore and at sites such as Alaska's Arctic National Wildlife Reserve (ANWR). By and large, the objections have been overcome and both BP and Shell are well on their way to extracting oil from these regions with fields in Chukchi and Beaufort. Cairn Energy is conducting exploratory work in the straits between Greenland and Northern Canada and Gazprom I constructing two arctic-class semi-submersible rigs to ply the Shtokma fields.

However, following the disaster on the Deepwater Horizon rig in the gulf of Mexico, US President Barack Obama imposed a six-month moratorium on deepwater drilling, a decision that had serious implications for oil companies planning in drilling in Alaska's frozen tundra.

Despite that decision being declared illegal by the US District Court, no oil company is likely to resume deep-water work until the legal process plays out. The Obama administration has said it will appeal; US Interior Secretary Ken Salazar says he'll soon issue another order laying out detailed reasons for the moratorium. The case could be on a fast track to the US Supreme Court.

Arctic drilling programme

In Alaska, where Shell's plans to drill exploratory wells in the Beaufort and Chukchi seas were put on hold for the year, the ruling has no practical effect in 2010. Even if it did, Shell spokesman Curtis Smith says the company wouldn't attempt anything this year because that would require a scramble after its demobilisation and that would be the worst way to embark on an Arctic drilling programme.

While the Arctic operations involve neither deep-water work nor the high-pressure wells of the Gulf of Mexico, the administration decided to hold off on final permits for Shell pending a review. Smith said Arctic drilling for 2011 remains in play, and it should be. With thoroughly vetted plans for prevention and spill response, and an unblinking, unbiased monitoring regime, the company should get the green light to drill.

Smith also pointed out that most in both industry and in government understand that the first order of business right now is to plug that well in the Gulf. While that blow out continues to bleed crude, doubt rules - doubt about where the industry should drill and produce, doubt about the total costs of the disaster, and doubt about how the United States should proceed.

Liberty Island

BP's challenging Liberty Island project lies just off Alaska's northern coast, on the edge of the Arctic Ocean. It will eventually become the world's largest and most powerful land-based drilling rig.

Once commissioned and operational, the rig will make history by drilling the longest extended-reach wells ever attempted. Extended Reach Drilling (ERD) is an extreme form of directional drilling - the drilling of non-vertical wells - that achieves horizontal well departures beyond the conventional, or achieves particularly challenging geometries.

The aim of ERD is either to reach a larger area from one surface drilling location, or to keep a well for a longer distance in a reservoir in order to maximise its productivity and drainage capability.

Winter comes quickly in Alaska: in September, cool breezes sweep across the Endicott gravel causeway and its drilling islands. In only a matter of weeks, winter arrives to freeze the ocean fast to shore.

And with the first snowfall, the islands and causeway are reduced to grey outlines against a world of white. By October, temperatures fall below zero Fahrenheit and winds scour freeze-dried snow off the island where the Parker drilling rig will stand tall - reaching 70m (240ft) above the pancake-flat terrain, the highest point for miles. Winter in this remote, northern outpost will quickly usher in some of the harshest weather on Earth.

'This is an incredible project. In the past, a new island and offshore pipelines would have been required,' BP's exploration and production chief executive Andy Inglis said on visiting the site late last year. 'This project is an example of bringing technology and capability together to do what, not so long ago, was considered impossible.'

Tapping into the offshore Liberty field from the near-shore Satellite Drilling Island will require wells with a horizontal 'departure' of 9km to 13km (six to eight miles). To handle the exceptional demands of rotating and moving a drill string in a well bore this long, the rig has to be able to apply an exceptionally high turning force to the drill pipe. Consequently, a key component in the new rig will be the massive top drive, the device slung in the rig derrick to grip and rotate the drill pipe. 'The drive can apply 105,000 foot-lbs of torque to the drill pipe, while rotating the pipe at 130 revolutions per minute,' says Darryl Luoma, BP Alaska's Liberty project general manager. 'In a typical rig, the top drive will provide torque in the range of 30,000-45,000 foot-lbs. In fact, the power of the drive is the highest rated on any drill rig worldwide. This piece of equipment delivers more than twice as much power requirement to turn the drill pipe as any other piece of equipment used on the North Slope.'

The specially-designed drill pipe is relatively lightweight, but can withstand the high torques that the top drive will be able to deliver. Because a single well might require 27,500-30,500m of drill pipe and casing, the new rig layout will include a pipe barn with more than 2,322m2 area. Equipment to automatically handle the assembly and positioning of the drill pipe will enhance rig safety.

'People won't have to physically screw the pipe lengths together. There is equipment that picks it up, puts it together, and then lifts it onto the drilling rig floor,' he adds.

The long wells will also require fluid pressures of up to 7,500psi, compared with the 3,500 to 4,500psi of a typical Prudhoe Bay drilling operation. And the volumes of fluid involved require an especially large drilling service module for fluid handling.

Advances in measurement while drilling technology will allow drillers to reach their distant targets with almost pinpoint accuracy. Powered by natural gas, the rig will be outfitted for Arctic conditions, including low-temperature-tolerant steel and thermal sound dampening insulation. It will be equipped with an integrated control system that provides centralised monitoring, command and management systems.

Orphan Basin

Another potentially interesting Arctic venue is the Orphan Basin. It lies far east of Newfoundland and Labrador, the North American continental shelf ends and the seabed begins dropping steadily to a depth of more than 2,500m, forming a geologic bowl known as the Orphan Basin.

This area has been the focus of an intense effort to gather additional seismic data about a series of deepwater prospects that have been studied for two decades, but never drilled. Drilling in the deep, frigid waters of the Orphan Basin is risky business in terms of finding enough hydrocarbons to make the venture worthwhile, but the potential is great.

Eight huge offshore blocks were part of the 14 parcels offered for lease in December 2003. A consortium of four companies, ExxonMobil Canada and Imperial Oil, Chevron Canada Resources and Shell Canada Limited, currently have an interest in these eight blocks with a total work commitment of more than $592m.

The co-venturers received exploration licenses in January 2004 and invested close to $80m conducting 3D seismic surveys covering some 3,200 square miles in 2004 and 2005.

The rock formations in the Orphan Basin were once part of a supercontinent that included Europe, Africa and North America. North America separated from Europe approximately 150 million years ago.

The land subsided to form the Orphan Basin, which soon filled with sediment and organic material. The space between the drifting continents became the Atlantic Ocean, but the layers of rock on each side of the original split are quite similar.

On the European side, we have the highly prolific North Sea and on the North American side, the Jeanne d'Arc Basin with producing fields like Hibernia. The Orphan Basin contains similar layers of rock so, in geological terms, the Orphan Basin is in a good neighbourhood.

If the Orphan Basin yields a significant discovery, a potential development would likely consist of a series of wellheads on the seabed tied to a floating production, storage and offloading (FPSO) vessel at the surface.

The FPSO would connect to the wells through a subsea manifold that could be safely disconnected within 15 minutes to allow the production vessel to move out of the way of large icebergs or dangerous storms.

Because the area is so remote and technically difficult, it will take more than a handful of average-sized reservoirs to become a commercial development.

Cleaning up the Arctic

But what if disaster should befall an operation in the frozen waters? There is really no solution or method today that can actually recover oil from the Arctic ice, says a senior official with a Canadian firm that specialises in oil-spill response.

'You can't lay boom on ice', Ron Bowden of the Canadian company Aqua-Guard Spill Response told a Canadian parliamentary committee. 'You can't recover oil from the surface, because it's hampered by the ice or under the ice, so it's quite a different scenario', he added.

In the wake of the Gulf Coast disaster, serious questions are being raised about the ability of oil companies and government responders to clean up a major spill in the harsh conditions of the Arctic. US President Barack Obama has suspended all applications for offshore oil drilling in the Arctic and Norway has stalled all deep-water drilling following the huge spill in the Gulf of Mexico.

According to Bowden, many of the techniques being used in the Gulf would be useless if a big spill were to occur under the Arctic ice.

Today, we do not have in existence any technology that can recover oil from ice. Bowden explained that traditional methods of cleaning up spills, such as the use of containment booms, would be ineffective at capturing oil trapped under the ice.

A report made by scientists funded by Shell and six other oil companies in November 2009, contradicts what the Canadian expert says. According to the scientists, ice can act as a natural blockade that traps the oil and gives responders more time to clean it up.

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