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Shell Abandons Alaska Drilling until Next Year

Mon Sep 17, 2012 2:45am EDT

(Reuters) – Oil major Royal Dutch Shell said it had decided to delay its hunt for oil in Alaska until next year after a piece of equipment used in a test was damaged, highlighting the difficulties of drilling in the icy Arctic sea.

Shell, which has spent about $4.5 billion on its effort to drill Arctic oil, said it will not attempt to drill into any oil or gas-containing rocks this year as a dome which could be used to contain oil in the event of a spill will take time to repair.

“In order to lay a strong foundation for operations in 2013, we will forgo drilling into hydrocarbon zones this year,” the company said in a statement on Monday.

Shell is not the only company to encounter difficulties in the tough Arctic conditions.

BP, Shell’s rival, indefinitely suspended a $1.5 billion offshore oil project in Alaska due to cost overruns and technical setbacks in July, while the Shtokman gas project in the Barents Sea in Russia is also proving too costly.

Shell will continue to work off the coast of Alaska but will only drill the top part of wells without drilling deeper into the ground, before temporarily closing the holes and returning to them next year.

There is a short drilling season in the Chuckhi Sea in the Arctic, which is only navigable for a few months a year, and Shell is still waiting to receive the final permits to allow it to proceed.

Shell halted oil drilling just one day after it started last week and requested that the government extended its oil drilling season beyond the Sept. 24 deadline.


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