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US Army joins battle to save stricken Shell rig

Adding to Shell’s problems, one of the company’s leading shareholders told The Sunday Telegraph that the market was “nervous” about the Arctic as there would be “hell to pay” in the event of a spill.

The US Army has been called in to help with the battle to salvage Royal Dutch Shell’s stricken Kulluk Arctic drilling rig, which has now been beached in environmentally delicate waters for nearly a week.

By : Sunday Telegraph 6 Jan 2013

The Kulluk, one of two rigs crucial to Shell’s controversial Arctic oil exploration plans, ran aground on New Year’s Eve as it was hit by a fierce storm while being towed to Seattle for maintenance.

Two Chinook helicopters from the 16th Combat Aviation Brigade flew to the scene on Friday to help transport heavy equipment for the salvage operations.

Three vessels are on site and a further 12 en route, according to the Unified Command managing the incident yesterday.

The Kulluk “continues to remain stable and upright and there is no evidence of sheen in the vicinity,” it said, indicating that the 143,000 gallons of diesel and 12,000 gallons of other oil products on board had not leaked.

But seawater has now been discovered in one of the voids between the double hulls of the vessel, indicating that the outer hull — made of steel up to 1.5in thick — could have been damaged. A 3-6ft buffer void between the hulls is designed to protect the inner hull, which is made of 0.4in thick steel.

Earlier visits showed that watertight hatches on the top segment of the rig had been breached and both the service and emergency generators had failed.

Shell has received a permit from Alaska’s Department of Natural Resources to remove the Kulluk from where it is grounded. However, spokesmen for Shell and for Unified Command were unable to say when they expected the rig to be moved.

The full scale of the damage may not be known until it is taken off the rocks.

Analyst Jon Rigby at UBS said if the damage could not be repaired in time for Shell’s planned drilling programme this summer, its entire Arctic operation could be delayed.

Safety plans dictate that Shell’s other Arctic rig, the Noble Discoverer, can only drill when the Kulluk is available to serve as backup in the event of a spill.

So far Shell has spent nearly $5bn (£3.1bn) on its Arctic project without being allowed to drill into oil-bearing zones.

Adding to Shell’s problems, one of the company’s leading shareholders told The Sunday Telegraph that the market was “nervous” about the Arctic as there would be “hell to pay” in the event of a spill.

He said Shell investors were generally “pretty fed up with their ‘spend more and more money’ strategy” across its portfolio and wanted to see it deliver higher oil production and profits.

“They are just spending money willy-nilly, it’s not really quite clear where the focus is,” the investor said. “They are trying to advance [on] too many fronts, not particularly well.”

As Shell attempted to manage reputational damage from the Kulluk incident, yesterday it appeared to try to row back from comments made by one of its own US spokesmen linking the timing of the journey of the rig to an attempt to avoid tax.

Shell will be subject to a tax charge of up to $7m for the Kulluk being in Alaskan waters on January 1.

“It’s fair to say that the current tax structure related to vessels of the type influenced the timing of our departure,” a Shell Alaska spokesman said before the accident. “It would have cost Shell multiple millions to keep the rigs here.”

But a UK Shell spokesman said yesterday: “The plan was always to move the Kulluk in December. While we are aware of the tax environment wherever we operate, the driver for operational decisions is governed by safety.” The maintenance work that was already required on the Kulluk could not have been completed in Alaska so the vessel had to be moved, Shell added.

Environmental groups have called on the US administration to suspend drilling permits for the Arctic.

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