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Ice, logistics delay Shell Alaska drilling plans

By Yereth Rosen

ANCHORAGE, Alaska | Fri Jul 6, 2012 11:29pm EDT

(Reuters) – Heavier than expected ice in Arctic waters off Alaska will likely delay until August Royal Dutch Shell Plc’s (RDSa.L) long-anticipated exploration drilling in the Chukchi and Beaufort Seas, a company spokesman said on Friday.

Shell, which wants to search for oil in what are considered remote but promising frontiers, had planned to start the wells this month, said Curtis Smith, a company spokesman in Anchorage.

Sea ice is “the number one reason we won’t be drilling in July,” Smith told Reuters. “At this point, we’re looking at the first week of August.”

While sea ice cover is sparse in most of the Arctic, ice off Alaska is thicker than in recent years, and that ice is melting fast, according to the National Snow and Ice Data Center.

Shell plans to drill two wells this year in the Beaufort at a prospect about 20 miles offshore, and three in the Chukchi about 70 miles offshore. Drilling must take place during the brief ice-free season, since federal approvals for the plans require that Shell cease all operations for the year by October 31.

The schedule is especially tight in the Chukchi, where Shell must cease drilling into known hydrocarbon-bearing zones by late September, with top-hole drilling allowed after then, Smith said.

Most of Shell’s 22-vessel fleet that will drill in both seas is now sailing to Alaska, Smith said. But Shell is awaiting U.S. Coast Guard approval for a specially equipped oil-spill barge now undergoing inspections in Bellingham, Washington.

Inspectors cited problems with its structural fire-fighting capabilities, electrical system and some of the welds, Coast Guard Commander Christopher O’Neil said. The weld issues were resolved, but he said Shell is seeking overall approvals under a different set of marine-safety standards than first considered.

“The issue isn’t so much structural condition as deciding what standard the vessel should meet,” he said, with Shell expected by Monday to apply for Coast Guard certification under marine-safety standards for mobile offshore drilling units, instead of those for fixed production facilities.

Shell has spent about $4.5 billion on the Alaska offshore program. It planned to start it years ago, before delays from litigation, a revocation and rewrite of an air-quality permit, and a regulatory review prompted by the Gulf of Mexico disaster.

Environmentalists and some Alaska Natives adamantly oppose the drilling plans as too risky in the remote Arctic waters.

(Reporting by Yereth Rosen in Anchorage; Editing by Braden Reddall, Gary Hill)


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