Shell to Suspend Arctic Offshore Drilling Program

By Suzanne Goldenberg, The Guardian

Shell shut down its 2013 drilling season in the Arctic waters off Alaska on Wednesday, after a series of mishaps and mechanical failures. The oil company said in a statement it was putting its operations off the coast of Alaska on pause for 2013, but remained committed to drilling at a later stage.

The decision raises further doubts about the future of drilling in the Arctic – given Shell's difficult and costly first season of hunting for oil last year. The company spent eight years and $5 billion to secure permits to drill two exploratory wells in the Chukchi and Beaufort seas.

Shell's Kulluk drill ship ran aground near Kodiak Island in December.
Credit: Action Press/Rex Features

“We've made progress in Alaska, but this is a long-term program that we are pursuing in a safe and measured way,” Shell's president, Marvin Odum, said in the statement. “Our decision to pause in 2013 will give us time to ensure the readiness of all our equipment and people.” He went on to say Shell remained committed to drilling in the Arctic.

The decision was praised by environmental groups, which said Shell's decision to call halt on drilling for 2013 was the only logical conclusion to a season of equipment failures and safety and environmental violations.

“Given Shell's performance over the past year, their decision to pause drilling for 2013 is one of the smartest moves they've made regarding Arctic operations,” said Andrew Hartsig, Arctic program director of the Ocean Conservancy. “Shell has clearly demonstrated that the company is not prepared to conduct safe and responsible operations in icy Arctic waters.” 

Shell's decision to call time on Arctic drilling for 2013 pre-empts the anticipated release next week of a high-level government review of Shell's first year in the Arctic – which was plagued by harsh weather and the breakdown of two key pieces of equipment. The review focused specifically on Shell's mechanical breakdowns in the Arctic, and possible safety and environmental lapses. The interior secretary, Ken Salazar, said soon after ordering the review that he had doubts about whether drilling could be safely conducted in the Arctic at all.

In July 2012, the Shell drill ship Noble Discoverer briefly drifted out of control near Dutch Harbor. Two months later, Shell's purpose-belt oil spill containment system was crushed – as easily a beer can – during a test in relatively calm waters off Seattle. In November, crew reported a small fire and propulsion problems on the Noble Discoverer. Then, on New Year's Eve, came the mishap that appears to have finally sunk Shell's drilling plans for the Arctic this year, when a conical drilling rig, the Kulluk, ran aground after being separated from its tow vessels in 70mph winds and high waves off the Gulf of Alaska.

The oil company said in a statement it was putting its operations off the coast of Alaska on pause for 2013, but remained committed to drilling at a later stage.
Credit: Petty Officer 2nd Class Zachary Painter/USCG

The oil company was forced to send both ships – the Noble Discoverer and the Kulluk – to Asia for repair, effectively ruling out a return to drilling this calendar year. Meanwhile, a Coast Guard investigation found 16 safety and environmental shortcomings on the drill ships, including air-pollution concerns.

In follow-up emails to reporters, Shell's spokesman in Alaska, Curtis Smith, said the company's future plans for the Arctic would depend on getting the two ships back in working order. “Our future exploration plans offshore Alaska will depend on a number of factors,” he wrote, “including the readiness of our rigs.”

The federal government had barred Shell from drilling into oil-bearing zones last summer, because of the failure of its oil spill containment system. The company, which was limited to drilling to about 1,500 feet, had hoped to return to finish off those holes in 2013. Environmental groups said they hoped the pause would force the Obama administration to re-evaluate its entire plan to open up Arctic waters for drilling.

“This pause is a real opportunity for president Obama to revisit his position on Arctic Ocean drilling. If the top oil company in the world has failed in its quest to drill in the harsh and unpredictable conditions in the Arctic, it is time to assess whether any oil company can safely drill in the Arctic Ocean,” Cindy Shogan, director of the Alaska Wilderness League, said in a statement. “With no infrastructure or ability to clean up an oil spill in ice and Shell's continual laundry lists of mishaps and failures, it is a no-brainer to suspend drilling in the Arctic.

But even given the billions that has been spent on drilling leases and equipment made to withstand the extreme conditions in the Arctic, the potential for drilling there remains enormous. The U.S. Geological Survey estimated the waters in the Arctic contain about 90 billion barrels of recoverable oil. Odum said in his statement that Shell was determined to return.

“Shell remains committed to building an Arctic exploration program that provides confidence to stakeholders and regulators, and meets the high standards the company applies to its operations around the world,” his statement said. “We continue to believe that a measured and responsible pace, especially in the exploration phase, fits best in this remote area.”

Reprinted with permission from The Guardian