Shell to Resume Arctic Drilling

Posted: February 2, 2015 in Econ 101, Technology and Energy

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Shell will resume drilling off Alaska coast – U.S. Arctic envoy

By David Ljunggren

Mar 31, 2015

OTTAWA (Reuters) – Royal Dutch Shell (RDSa.L) will resume drilling off Alaska after suspending operations for two years in the wake of an accident, the special U.S. envoy to the Arctic said on Monday, but gave no details as to when.

Shell has been moving oil rigs to Alaska as it awaits the green light from U.S. authorities. It froze operations in 2013 after the grounding of a rig in Alaska prompted protests from environmental groups.

“Clearly Shell and others will resume drilling and exploration up off the North Slope of Alaska,” Admiral Robert Papp said in an interview during a visit to Canada.

Papp, noting the accident had happened in December 2012 after that year’s drilling season had ended, said the Anglo-Dutch oil major understood the importance of taking all the necessary precautions.

“I think Shell is putting significant resources into this to make sure they have enough people, equipment, resources, redundancy. They should be OK,” he said.

Any company operating in the Arctic had to follow U.S. Department of the Interior rules on safety, preparation, extra equipment and additional drill rigs, Papp said, adding they had to be capable of drilling a relief well if necessary.

The Arctic is estimated to contain 20 percent of the world’s undiscovered hydrocarbon resources, although the reserves are extremely remote and costly to develop.

Environmentalists fear the remoteness of the region and the near total lack of infrastructure mean the consequences of a drilling accident could be disastrous.

Papp said, however, he was more worried about two ships colliding in the Bering Strait – the narrow passage that divides Alaska and Russia – than an oil spill.

“The oil companies have done this before. They’re drilled in areas like this – it’s relatively shallow, the wells are not high pressure … so I think they can do it,” he said.

Papp, who headed the U.S. Coast Guard before taking up his new post last year, said that while the Department of the Interior was responsible for drilling operations, he had an interest as the Arctic envoy.

“I would not say that there’s any official fingerpointing at them, but I’ve spoken to Shell officials numerous times over about a four-year period and they clearly know the pressure is on,” he said.

“They understand it’s very important for their company, and they also understand that it’s very important from a public relations standpoint as well. So they get it.”



As Obama administration weighs Arctic drilling, Shell moves rigs to region

WASHINGTON — The Obama administration is set to announce within days whether it will reaffirm a 7-year-old government auction of oil leases in the Chukchi Sea — a decision critical to Shell’s plans to resume drilling in those Arctic waters this summer.

Even before the pending decision, Shell Oil Co., has begun moving its drilling rigs to the region, marking the clearest sign yet that the firm expects to be boring new Arctic wells this summer.

Interior Secretary Sally Jewell is tasked with deciding whether to affirm, modify or void the 2008 lease sale at which Shell spent $2.1 billion buying its existing drilling leases, following years of legal challenges to the auction.

The Bureau of Ocean Energy Management recommended Jewell validate the 2008 Chukchi Sea auction and all of the oil and gas leases sold during it in a court-ordered environmental analysis released last month. That triggered a 30-day waiting period before Jewell could issue her “record of decision” on the sale.

Even if Jewell okays the sale, Shell must secure drilling permits and other regulatory approvals as part of its quest to return to the Chukchi Sea north of Alaska, where it drilled the first part of one well into its Burger prospect in 2012.

The company isn’t waiting on the approvals to mobilize its fleet of drilling rigs and support vessels.

Both of Shell’s contracted drilling rigs — the drillship Noble Discoverer and the Polar Pioneer, a Transocean semi-submersible drilling rig — are now traveling through waters near the Philippines en route to Seattle, where they are sure to get a chilly reception from local Arctic drilling opponents.

Activists with Greenpeace are in a boat trailing the Polar Pioneer, which does not have its own propulsion and is being heaved across the ocean via the Blue Marlin, a heavy-lift ship designed to transport massive cargoes.

Shell has already submitted a broad exploratory plan to the ocean energy bureau, outlining its ambitions to drill up to six wells on its Burger prospect over several years. By putting two rigs to work at the same time on separate wells about 70 miles off the Alaska coast, the company hopes to maximize the short window when the waters are free of ice and exploratory drilling is permitted.

Environmentalists opposed to offshore drilling fear that federal regulators will feel added pressure to approve Shell’s plans once its rigs are in the region — well in advance of an open-water exploratory drilling season that could begin as early as July.

“There’s no reason to rush,” said Michael LeVine, senior Pacific counsel for the conservation group Oceana. “The pressure that’s been put on the regulatory agencies and the company is what leads to poor analysis, poor decisions and problems. There’s no reason for this compressed timeline.”

The ocean energy bureau has 30 days to approve, deny or request changes to Shell’s exploration plan once the agency deems it formally “submitted” — a declaration that can not happen before the Interior Department issues its record of decision on the disputed 2008 lease sale.

Even then, the agency is expected to take public comments on both the plan itself and the scope of a required environmental analysis pegged to the proposal.

Separate drilling permits also are required from the Bureau of Safety and Environmental Enforcement. And government inspections are expected for Shell’s drilling rigs, following work in Asian shipyards.

Environmentalists have made a last-ditch appeal against Arctic drilling, asking Jewell to invalidate the 2008 Chukchi Sea lease auction.

In comments filed with the ocean energy bureau on March 18, Greenpeace faulted the agency’s newly revised environmental analysis for failing to calculate all of the greenhouse gas emissions associated with the oil and gas that could be extracted from the Chukchi Sea. The analysis focuses on emissions tied to exploration, development and production of those fossil fuels, but Greenpeace said the calculation should wrap in greenhouse gases that would be released downstream, when the extracted oil and gas is later consumed.

The Seattle City Council voiced its opposition in a March 23 letter, insisting that Jewell should suspend Arctic oil and gas activities in order to “carefully reassess whether and how offshore drilling in the Arctic Ocean is possible or prudent.”

“Carbon dioxide released Arctic drilling will contribute to rising sea levels,” including the waters that lap Washington state, the council members write.

The Seattle City Council is probing whether Shell’s plans to stash about eight vessels at the Port of Seattle violate a permit granted to the permit two decades ago.

And environmental groups are challenging the Port of Seattle’s decision to lease a terminal to Foss Maritime Co., which in turn plans to accommodate Shell’s Arctic fleet, saying the environmental impacts of the move should have been studied first.



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