Shell Suspends Arctic Drilling Plan for 2013

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Shell’s rig, the Kulluk, floats aside the yellow tug, the Alert, in Kiliuda Bay, Alaska, where it was towed after its New Year’s Eve grounding. (Photograph courtesy U.S. Coast Guard, Petty Officer 3rd Class Jonathan Klingenberg)

The troubles that roiled Shell’s rig, the Kulluk, off the coast of Alaska this past winter will reverberate through the summer; the oil company announced today it would not seek to drill in U.S. Arctic waters in 2013. (Related: “In Kulluk’s Wake, Deeper Debate Roils on Arctic Drilling“)

“We’ve made progress in Alaska, but this is a long-term programme that we are pursuing in a safe and measured way,” said  Marvin Odum, director of Shell’s Upstream Americas division.  “Our decision to pause in 2013 will give us time to ensure the readiness of all our equipment and people following the drilling season in 2012.”

Shell never drilled into oil-bearing formations in the Arctic last year, but completed top-hole drilling on two wells in the Beaufort and Chukchi seas, marking the industry’s return to offshore drilling in the Alaskan Arctic after more than a decade. (Related: “Ice-Breaking: U.S. Oil Drilling Starts as Nations Mull Changed Arctic“) Shell noted the drilling was completed safely, with no serious injuries or environmental impact.

But other troubles beset its two specially equipped rigs. Its drill rig, the Noble Discoverer, slipped its anchor in Alaska’s Dutch Harbor last summer before heading north, and after it returned in the fall, a small fire broke out aboard ship. But it was a mishap with Shell’s other rig, the Kulluk, that mobilized an extraordinary rescue and recovery drama. A violent storm caused it to lose its mooring to tow ships and run aground on New Year’s Eve. (Related: “Pictures: Errant Shell Oil Rig Runs Aground Off Alaska”)The U.S. Coast Guard-led response, including a rescue of the crew by helicopter, eventually involved more than 700 people.

The incident ended with no spill of the diesel fuel or oil products that the Kulluk carried. But Shell said that both the Kulluk and the Discoverer will be towed to Asia for maintenance and repairs.

Because Shell’s permits for drilling in the Arctic were predicated on use of the two rigs, the decision to forgo drilling this season is not unexpected.  But how long a “pause” in Shell’s plans will depend not only on the company’s own timetable, but on U.S. regulators. After the Kulluk incident, U.S. Interior Secretary Ken Salazar ordered a 60-day review of last year’s Arctic drilling program, the results of which are expected by the end of next week.

Although none of Shell’s mishaps involved drilling, some environmentalists are urging a revamp of the exploration plan to include more stringent safeguards, while many others are working to halt drilling altogether.

“It appears Shell is realizing they need to take a more careful approach to ensure they don’t put the Arctic’s  people and marine life at risk,” said Marilyn Heiman, director of the Pew Charitable Trusts’ U.S. Arctic Program, in an email. “The causes of last year’s mishaps must be remedied so they do not occur in the future. It’s time that all parties, from the administration and local communities to conservation groups and industry sit down and develop world class industry standards and ecological and cultural protections to safeguard the Arctic.”

David Yarnold, president of the National Audubon Society, however, maintains spills will happen no matter how careful the oil companies are.  “Shell has seen the ice. Or the light,” he said in a prepared statement. “Drilling amid ice floes in the neighborhood of nurseries for threatened wildlife isn’t either smart or safe. Shell seems to have come to its senses for now – but how many accidents did it take?”

But Shell, which has invested more than $4.5 billion in leases and equipment for exploration in the Alaskan Arctic, said it is committed to drilling there in the future. “Alaska remains an area with high potential for Shell over the long term,” the company said, adding that resources there would take years to develop.

A 2008 report by the U.S. Geological Survey estimated that the area north of the Arctic Circle holds 13 percent of the world’s undiscovered oil, and 30 percent of its undiscovered natural gas. (Related: “Pictures: Four New Offshore Drilling Frontiers”)