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Despite new plan and better vessels, Shell decides not to drill in Alaska Arctic this year

Apr 3, 2014 12:04 PM
Drillship Noble Discoverer is tied up at Vigor Shipyard in Seattle in 2012. The vessel had been scheduled to return to the Alaska Arctic this year, but Royal Dutch Shell officials have decided not to resume drilling in the region.

Kyle Stubbs

Drillship Noble Discoverer is tied up at Vigor Shipyard in Seattle in 2012. The vessel had been scheduled to return to the Alaska Arctic this year, but Royal Dutch Shell officials have decided not to resume drilling in the region.

Royal Dutch Shell’s off-again, on-again plans for offshore oil exploration in Alaska’s Arctic are back on hold — at least for 2014.

After operational setbacks in 2012 and a self-imposed moratorium in 2013, the company was scheduled to resume operations in the Chukchi Sea this summer with a revised contingency plan and an upgraded drillship. That changed on Jan. 30, when new Shell Chief Executive Ben van Beurden announced that the company was postponing the project for 2014.

Van Beurden cited a Jan. 22 ruling by the 9th Circuit Court of Appeals that challenges the validity of offshore Arctic oil leases issued by the U.S. government. The court, responding to a lawsuit by environmental and tribal groups, agreed that the government underestimated the amount of oil drilling that would occur when it sold the leases in 2008. The ruling could jeopardize the environmental impact statement that accompanied the sale, opening the door to protracted legal action.

“This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” van Beurden said in a Shell news release. “We will look to relevant agencies and the court to resolve their open legal issues as quickly as possible.”

Two years ago, the company’s efforts in the Arctic were marked by the near grounding of the drillship Noble Discoverer and the grounding of Kulluk, a conical drilling vessel. The U.S. Coast Guard cited Discoverer, contracted by Shell from Noble Drilling Corp., for safety and pollution control violations after it lost propulsion and had to be towed to the port of Seward.

Both vessels were taken to Asian shipyards for repairs. Shell subsequently announced a “pause” in exploratory drilling in the Chukchi and Beaufort seas for 2013 to ensure the readiness of its equipment and personnel for future projects.

In November of last year, Shell filed a plan with federal regulators to return to the Chukchi Sea with an upgraded Discoverer and a containment dome kept on standby in case of spills. The company planned to contract with Transocean for a second drillship, Polar Pioneer, which would have remained in Dutch Harbor for deployment “only in the unlikely event” that a relief well was needed, according to Shell’s integrated operations plan (IOP).

The Coast Guard cited Discoverer for 16 deficiencies in 2012, including a lack of engine maintenance that resulted in the loss of main propulsion and an exhaust system explosion; fire screen doors in accommodation spaces that would not self-close; and abnormal propeller shaft vibration that required the shutdown of the main engine at sea.

In its new operations plan, Shell said it had made changes that rendered the drillship “Arctic-ready.”

“Since the end of 2012 operations, the Discoverer has undergone a rigorous maintenance and upgrade program implemented by Noble Drilling with Shell’s involvement,” the company stated. “… This program has included work to the hull, as well as to major ship systems with a focus on improving safety and environmental performance and operational efficiency.”

Shell acknowledged in its IOP for 2014 that it could face challenges similar to those it experienced in 2012. Drilling in the Burger prospect had been scheduled for July through October.

“Vast distances, harsh weather and sea conditions, possible volcanic and earthquake activity, and sparse shore-based infrastructure represent some of the considerable obstacles that must be planned for and accommodated,” the company stated. “Conversely, the open water season, long daylight periods, shallow water, dedicated oil spill response equipment, ice management vessels (and) the Shell Ice and Weather Advisory Center mitigate many of these challenges.”

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