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Shell takes key step on scaled-back Alaska drilling

Posted on August 1, 2012 at 12:01 am by Jennifer A. Dlouhy

WASHINGTON _ Shell on Tuesday began preparations to install anchors at the site of one of its planned wells in the Chukchi Sea north of Alaska — a major step toward launching a new era of Arctic oil exploration, even as the company has been forced to scale back its drilling plans.

Delays in construction of an emergency spill containment barge, last-minute problems with an essential air pollution permit and stubborn sea ice still clinging to Alaska’s coast have shortened the company’s drilling window. And now Shell believes just two out of 10 wells planned for the Beaufort and Chukchi seas are likely to be completed this year.

Even those might be tough, conceded Shell Alaska Vice President Pete Slaiby in an interview. “We hope we get two wells drilled to completion,” he said. “But it’s going to be a challenge.”

Shell has to stop drilling in hydrocarbon-bearing zones by Oct. 31 in the Beaufort Sea and Sept. 24 in the neighboring Chukchi Sea. Shell also will be forced to suspend operations in the Beaufort Sea to allow native Alaskans time to hunt the bowhead whale that migrate through the area; whether the company can resume work there this year would be up to Interior Department officials.

Shell had hoped to launch drilling in July, but sea ice and other setbacks have postponed work until later this month at the earliest.

“It’s going to be tough just because of the late ice season that we’ve got,” Slaiby said. “We’re still pretty bullish about being able to work through the Chukchi Sea. We’ve got a bit of an issue in the Beaufort Sea, with the whaling blackout.”

If the weather cooperates and regulators sign off on the plans, Shell aims to stay in the area longer and conduct so-called “top-hole drilling,” effectively getting a start on wells it would temporarily abandon and then complete in 2013.

Slaiby said there is precedent from the 1990s and 1980s, when Shell and others drilled roughly three dozen wells in the area, with work sometimes spanning two or more seasons.

Operations have to be managed around sea ice, which can swiftly encroach on ships in fall. One of Shell’s ice management vessels is in the Chukchi Sea now, and another, the Aiviq, is set to soon deliver the first set of anchors that will be used to position the Noble Discoverer drillship above the company’s Burger prospect.

Slaiby said the deployment of the anchors _ which each will take about eight hours to set _ marks a “red letter day.”

The development also underscores Shell’s confidence it will be allowed to drill, even though it still must secure Interior Department permits for individual wells and win other approvals.

Shell has spent nearly $5 billion and more than seven years preparing for the Arctic oil exploration — and its performance this summer will set benchmarks for other companies hoping to follow suit.

The Environmental Protection Agency has yet to rule on a request by Shell to waive some emissions limits in a permit governing pollution from the Discoverer drillship.

And as of mid-Tuesday, Shell was still working on the classification and inspection of the newly built Arctic Challenger oil spill containment barge required under its government-approved spill response plan.

Slaiby said he expects sea trials of the barge to begin this weekend, paving the way for Shell to seek a “certificate of inspection” from the Coast Guard before the Challenger gets under way.

Mike LeVine, Pacific senior counsel for the conservation group Oceana, said federal regulators “should not be persuaded by Shell’s efforts to create momentum.”

“The company is continuing its aggressive push, but they may be counting their chickens before they have hatched,” he said, adding that regulators “still have serious considerations they should give to Shell’s requests, including the request to waive conditions they previously agreed to.”

Shell is investigating what caused its Discoverer drillship to drag its anchor and drift toward an island near Dutch Harbor, Alaska, last month.

Although the single anchor used then is different than the eight-anchor mooring system Shell will use in the Arctic, the incident was a black eye for company.

“We strive to have absolutely flawless operations and clearly we are unhappy that happened,” Slaiby said. But, he added, Shell was pleased with the quick response by a tug on standby that was able to get the drifted ship back in place within 28 minutes. “It was not a good incident, but the response was good,” he said.

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