ConocoPhillips changes its mind about the Chukchi Sea

April 14, 2013

ConocoPhillips announced it has called off its plans to explore in arctic waters off Alaska in 2014.

The Chukchi Sea is estimated to hold 12 billion barrels of recoverable oil. Development requires significant industry investment (tens of billions of dollars) which will create
thousands of jobs across the U.S. as well as creating billions in royalty and tax revenue for federal, state and local governments.

ConocoPhillips just a few weeks ago had proposed to drill up to two exploration wells in the Devils Paw prospect (80 miles offshore) during the open water season of 2014 using a state of the art jack up rig will be used for drilling operations. A jack up rig is optimal for shallow water depths (~140’ at the COP location), minimizes downtime due to weather and provides a surface blow out prevention (BOP) system for well control and intervention.

ConocoPhillips mentioned:

• The need for all the ‘regulatory stakeholders’ to be aligned.
• It would not be prudent to commit financial resources at this time.

Another factor that may have had an impact on the decision:

• The experience of Shell in 2012 with the grounding of the Kuluk in rough seas.

Commentary

Drilling offshore is expensive and extremely challenging from a number of perspectives. ConocoPhillips is biding its time in light of Shell’s experience of 4 months ago.

Sources

• a)Dan Joling, The Associated Press, Yukon News, 12-Apr-2013, p.17.



• b)http://alaska.conocophillips.com/EN/news/media/Documents/FactSheet-Chukchi.pdf