February 11, 2013
Shell Vessels Sidelined, Imperiling Arctic Plans
HOUSTON — In another blow to its Alaskan Arctic drilling program, Royal Dutch Shell said on Monday that it had decided to tow its two drill vessels there to Asian ports for major repairs, jeopardizing its plans to begin drilling for oil in the icy northern seas next summer.
The new potential delay in drilling does not necessarily doom Shell’s seven-year, $4.5 billion quest to open a new oil frontier in the far north, but it may strengthen the position of environmentalists who have repeatedly sued to stop or postpone exploration that they claim carries the risks of a spill nearly impossible to clean up.
It may also give the Obama administration considerably more time to decide whether to allow Shell to continue operations in two Arctic seas after repeated accidents, failed inspections and mechanical problems that have called into question the company’s safety management.
The administration has supported Shell’s efforts to explore what could be a huge new oil field that has the potential to produce hundreds of millions of barrels of oil over decades. But two separate federal inquiries, one into the New Year’s Eve grounding of one of the drill vessels, the Kulluk, and a more general review of Shell’s safety controls and oversight of contractors, have also stalled its plans.
Shell executives said the decision to send the two drill vessels to Asia, where there are extensive dry dock facilities for repair work, was voluntary and the extent of the work needed was unknown.
“We have not made any final decision on 2013 drilling in Alaska,” said Curtis Smith, Shell’s spokesman in Alaska. “The outcomes of inspections and the scope of repairs needed in Asia will decide that.”
For drilling to proceed, two vessels are needed, one to stand by to drill relief wells in case of a blowout. It would be difficult to find other suitable ships for drilling in the Arctic.
Shell executives said the Kulluk had sustained damage to its hull when it was grounded in a fierce storm on tiny Sitkalidak Island. Seawater also caused electrical damage.
They said the propulsion systems on the second drill vessel, the Noble Discoverer, needed maintenance work and might need to be replaced for the ship to be seaworthy and pass Coast Guard inspections.
The Noble Discoverer dragged its anchor last July and nearly ran aground on the Alaska coast, and four months later it was damaged by an explosion and fire while in port in the Aleutian Islands. In late November, a Coast Guard inspection team found problems with the Noble Discoverer’s pollution control systems.
“Shell can’t get away from the fact this has been a difficult, complex operation that didn’t go well,” said Lois Epstein, an environmental engineer at The Wilderness Society and a member of an Interior Department advisory panel on offshore drilling safety. “They knew they were under tremendous scrutiny and they still couldn’t perform.”
A separate oil spill response barge failed Coast Guard inspections in August and was fined for four illegal fluid discharges. When a containment dome carried on the barge was tested last summer off the coast of Washington State, it came loose while being lowered into the water. As the dome floated to the top, the steel siding bent under the water pressure.
Without the necessary containment equipment, Shell’s two drill vessels were not able to drill in deep zones containing oil and gas. Instead they drilled a couple of top holes in preparation for deeper drilling next summer.
The brief window for drilling, based on ice floes and agreements with Alaska Natives to protect whales and other wildlife, opens in July and continues into October. Over the last four years, Shell was prepared to drill but was stopped by court challenges, regulatory delays, a moratorium on drilling after the 2010 BP spill in the Gulf of Mexico and failed permit tests.
The two drill vessels are aging, which may have contributed to the problems.
The Noble Discoverer, built in 1966, was a log carrier before it was converted into a drill ship in 1972. It has been upgraded several times, but environmentalists have questioned whether it is fit to operate in the winds and ice of the Arctic. After a day of drilling last September, Shell was forced to disconnect the rig from its seafloor anchor as a large ice pack approached 10 miles away.
The Kulluk was built in 1983 and has drilled a dozen wells in the Beaufort Sea. But it has not drilled a complete well since 1993, and it was moored for 17 years in the Canadian Arctic. Shell has already spent more than $200 million overhauling the vessel.
The Noble Discoverer will undergo maintenance in South Korea. A decision on the location for maintenance of the Kulluk has not been made.