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U.S. to allow Shell to begin prep work for drilling in Arctic

WASHINGTON | Thu Aug 30, 2012 4:10pm EDT

(Reuters) – Royal Dutch Shell (RDSa.L) will be allowed to begin some “limited” drilling in Alaska’s Chukchi Sea, the U.S. government said on Thursday, as the company struggled to keep its Arctic exploration plans this year alive.

The U.S. Interior Department said Shell will be permitted to begin preparatory work in the Chukchi, but cannot tap areas containing oil until the government certifies its oil spill containment system.

Shell’s long-delayed $4.5 billion effort to drill for Arctic oil looked close to fruition this year but the company has run into snags.

“At this point we don’t know what exactly is going to happen with Shell and whether they are going to be able to complete a well in the Arctic this year,” Interior Secretary Salazar said on a conference call with reporters.

In addition to seeking modifications to its air-quality permits from the U.S. Environmental Protection Agency, the company is still waiting for its oil-spill containment barge, the Arctic Challenger, to be approved by the Coast Guard.

Without that containment system, Interior said it will not allow Shell to drill for oil in the Arctic.

Still, Shell welcomed the government’s decision to allow some drilling to commence.

“The Administration’s decision to approve initial drilling into non-oil-bearing zones in the Chukchi Sea reflects the national importance of understanding the energy resource offshore Alaska,” Shell spokesman Curtis Smith said in a statement.

Facing delays, Shell has asked the government to extend its oil drilling season in the Chukchi beyond the September 24 deadline currently in place.

Salazar said Thursday it would be premature to decide on that request until Shell received its final approvals, however.

(Reporting by Ayesha Rascoe and Yereth Rosen; Editing by Jeffrey Benkoe and David Gregorio)

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