WASHINGTON — After Shell Oil Co. dedicated nearly eight years and $5 billion to the quest, its plans to continue hunting for Arctic oil this summer are in jeopardy, as company officials confirmed Monday that they must tow two drilling units to Asian dry docks for repairs.
Although Shell officials said the company has not ruled out drilling in the Chukchi and Beaufort seas north of Alaska this summer, it appears unlikely the vessels will be able to make the two-to-four-week treks to those Asian ports, undergo repairs, clear U.S. inspections and then return to the Arctic waters in time for the drilling season that begins in July.
The decision also could provide fresh fodder to federal regulators reviewing problems Shell encountered during the 2012 Arctic drilling season and embolden environmentalists who oppose oil exploration in the remote, icy waters.
Shell’s Kulluk drilling rig ran aground on an Alaskan island on New Year’s Eve and the drill ship Noble Discoverer experienced propulsion problems pulling into Seward, Alaska, last November. Inspections of the 29-year-old Kulluk conical drilling unit revealed hull damage warranting major repairs and further assessments, Shell said.
The Discoverer is destined for a shipyard in South Korea, and Shell is planning on sending the Kulluk to an undetermined Asian shipyard with a suitable dry dock, said spokesman Curtis Smith.
The drilling rigs will be towed to the ports with oceangoing dry docks capable of holding aloft and hauling heavy vessels across the globe. Smith said the drilling rigs could begin their long journey in three to six weeks.
“The outcome of further inspections for both rigs will determine the shipyard schedule and timing of their return to service,” Smith said. “Dry towing is a time efficient way to get both rigs to suitable shipyards to begin necessary work that will allow us to better assess our options.”
Smith said the company has made no final decisions but is “exploring a range of options for exploration work offshore Alaska in 2013.”
There may be no ready replacements for the specialized Arctic drilling vessels, both designed to weather ice.
Shell used the Kulluk and Discoverer to drill the first half of two wells in the Beaufort and Chukchi seas last summer, seven years after buying drilling leases in the region for $2.2 billion. Shell was forced to constrain its 2012 operations to such “top-hole drilling” of only the initial 1,500 feet of its Arctic wells when its oil spill response system could not win approval and get to the area before ice started encroaching.
Critics say the problems with the Kulluk and Discoverer, along with other mishaps last year, should force Shell to rethink its Arctic aspirations.
“It’s time for Shell to reevaluate whether it makes sense to continue pouring money into this complex and difficult drilling effort,” said Lois Epstein, Arctic program director for the Wilderness Society. “These serious transportation, logistics and drilling failures - collectively - provide strong evidence of Shell’s inability to effectively undertake oil drilling in the harsh environment of the Arctic Ocean, and raise questions about any company’s capacity to do so.”
Shell officials have argued that the Kulluk and Discoverer incidents were maritime mishaps, not drilling problems.
Shell spent nearly half a billion dollars renovating the two drilling vessels before they set sail from a Seattle shipyard last year. The company also has built a broad infrastructure along Alaska’s northern coast to support its offshore exploration program. And it poured more than a half billion dollars into building specialized emergency oil spill response systems.
Business, Pages 68 on 02/17/2013