Shell returns to Alaska, takes lease sale for Beaufort Sea area by storm

Posted: Friday, April 01, 2005

ANCHORAGE - Shell Oil Co. dominated a federal offshore lease sale in Alaska that tallied $46.7 million in winning bids.

A global oil giant that abandoned Alaska several years ago, Shell stormed back at the bid opening Wednesday.

Shell accounted for $44.4 million in bids on 86 blocks within the vast Beaufort Sea sale area, which spanned most of the top of Alaska from Barrow east to the Canada border.

Shell paid more than $12 million on a single block off Point Thomson, some 60 miles east of Prudhoe Bay, a spot where a drilling partnership including Shell struck oil in 1985. The remote discovery, known as Hammerhead, was never developed, even though it was estimated to hold as much as 200 million barrels of oil.

The bid results excited officials with the U.S. Minerals Management Service, which ran the sale and regulates offshore oil and gas activity. The bid total was the most for a federal offshore lease sale in Alaska since 1988 but well below the record of nearly $2.1 billion raised in a Beaufort Sea sale in 1982.

Especially encouraging was Shell's big-money play, which someday could lead to exploratory drilling and even production, said John Goll, Alaska director for the MMS.

"It's a very strong signal to us and to the state," he said. "We've been encouraging new companies to come to Alaska. We hope it's for the long term."

The results were not completely rosy. Of the 127 blocks that drew bids, covering nearly 619,000 acres, not a single block drew bids from more than one company. Shell, in submitting 11 bids of $1 million or more, never had a competing bid to worry about.

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