Oct. 2--Shell is making gradual progress on federal permits for its planned 2010 exploration program, but there are still bumps in the road and the days are ticking by.

The company hopes to get a clear indication by this winter that permits will be issued before committing to tens of millions of dollars to mobilize a drill ship and a small fleet of icebreakers, spill response barges and other support vessels, says Pete Slaiby, the company's top Alaska manager.

Two years ago, Shell spent $200 million to bring a group of vessels and two drill ships to Alaska to explore in the Beaufort Sea, but was shut down after environmental groups filed lawsuits.

The company plans a smaller program this year with one drill ship, and hopes to drill two to three wells between leases in the Beaufort and Chukchi seas this year.

Despite the setbacks and slow progress, Shell is still bullish on the Alaska outer continental shelf.

"After several years of seismic work, we really like what we are seeing," in the underground rocks, Slaiby said. "Some of the prospects are very large, spanning entire lease blocks, and there are a lot of them."

Discoveries have been made in previous exploration in both the Beaufort and Chukchi sea OCS, and Shell is now targeting these areas.

The Chukchi Sea has been described by U.S. Minerals Management geologists as having the potential to be as prosperous as the Gulf of Mexico, and Slaiby said if the region lives up to its potential, production could substantially offset U.S. dependence on foreign oil imports.

However, the Beaufort Sea also looks very prospective, and more so after recent seismic, Slaiby said. It could also be developed faster than discoveries in the more remote Chukchi Sea.

New production from the Beaufort Sea, and eventually the Chukchi, could supplement declining production from onshore North Slope fields in providing oil to the Trans-Alaska Pipeline System, which is now operating at about one-third of its capacity.

Oil and gas from the Chukchi Sea would require not only pipelines to shore but across the National Petroleum Reserve-Alaska as well, Slaiby said.

However, pipelines for both oil and gas built across NPR-A would open the federal reserve, leading to development of many small and medium-sized prospects in the reserve, adding even more new production.

In terms of its permits for 2010 summer drilling, the U.S. Minerals Management Service expects to make a decision on Shell's Beaufort Sea exploration plan in mid-October, according to John Goll, the agency's regional director.