Shell's President Tempers Optimism on Lifting of Drilling Ban

WASHINGTON (Dow Jones Newswires), September 30, 2008

The head of Royal Dutch Shell's U.S. operations is taking a realistic perspective on the lifting of the federal ban on drilling in the Outer Continental Shelf.

Shell Oil Co. President Marvin Odum said Friday that while he's optimistic drilling activity could take place off the Atlantic and Pacific coasts in the years ahead, there are still major challenges ahead that could prevent new production, including another Congressional moratorium.

The Senate is later in the day expected to lift the decades-old ban on offshore drilling after the House earlier this week was forced by to let the historic moratorium expire in a temporary government funding bill, facing a budget showndown with Republicans and the White House.

"I'm very realistic about what this means," Odum told reporters in a briefing. "It's an important signal...that reflects a shift in public sentiment," the executive said, referring to polls that have shown a surge in voter support for new drilling as oil prices have flirted with record highs.

"But it is a possibility that (the ban) comes right back on," as many Democrats - who are expecting to gain seats in both the chambers on Capitol Hill, if not in the White House - are threatening to do in the next session of Congress.

Also, "so much has to happen in the government before we do anything...there are years involved in that," Odum said.

In anticipation of a possible moratorium expiration, the Department of the Interior's Minerals Management Service initiated the process earlier this year to draft a new five-year leasing plan starting in 2010 that covers areas currently closed, particularly off the coast of Virginia.

Odum said his company was interested in exploring off the coast of Virginia, where natural gas supplies are estimated to be plentiful, "as well as a number of other areas off both coasts."

The MMS estimates that the areas along the Outer Continental Shelf in the lower 48 states holds around 18 billion barrels of oil and 77 trillion cubic feet of natural gas, though the estimate is based on decades-old data, and many say that number could be higher.

Like many oil industry analysts, the executive said the estimates could be much higher given they are based on decades-old data.

"There are exciting things on both coasts," he said.

Congress, meanwhile, could always halt the process with a new moratoriam, limit the new acreage to certain distances off the shores - a proposal that many lawmakers have sought as a compromise - or not offer states a share of the royalty revenues, which could prove to be a hurdle to new activity.

Even if the new access is opened, Odum said he expected major legal battles such as those the industry is facing in Alaska as environmentalists challenge the industry's right to drill: "I'd be crazy not to" expect similar opposition.

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