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Shell takes pause from returning to Alaskan drilling

Regulatory authorities and Shell are investigating the problems that hit the 2012 drilling programme

Shell’s plans to return to Alaska’s Arctic waters in 2013 have been put on ice while the company and US regulatory authorities investigate the causes of a series of problems that hit the 2012 drilling programme. 

Marvin Odum, the president of Shell’s US business, said On 27 February the company would take a “pause” in the Beaufort and Chukchi seas in Alaska, while authorities look into the grounding of its Kulluk drillship on 31 December.

The announcement came just a week after the US Coast Guard handed a report over to the Department of Justice on alleged safety violations at a second rig, the Noble Discoverer, which could lead to criminal charges against Shell or the rig’s operator Noble Corporation.

After the prolonged Deepwater Horizon disaster, regulators required Shell to deploy an additional rig that could immediately start drilling a relief well in the event of a blowout.

The US Department of the Interior is also conducting its own review of Shell’s 2012 drilling programme, which interior secretary Ken Salazar ordered on 9 January.

In a statement, Odum said Shell would use the downtime to “to ensure the readiness of all our equipment and people following the drilling season in 2012”.

Shell’s Arctic foray marked the first new exploration in the US’ northern extremes in almost two decades. But the programme has been beset by problems, protests and delays.

The company’s 2012 programme was delayed after the company was slow to gain clean air permits from the Environmental Protection Agency (EPA). A late drilling start was further impeded by pack ice that nearly scuppered the entire effort.

Shell had hoped to drill 10 wells in 2012, but reduced it to five as the number of days in the Summer drilling season dwindled. In the end it managed to set the top-hole sections on just two wells.

Shells troubles did not end with the drilling season. In late December the Kulluk drillship was being transported across the Gulf of Alaska when high winds and high seas caused it to break free from its tow lines and run aground off Kodiak Island. On 21 February it was released by the Coast Guard for the journey to dry-dock in Asia.

Shell had already spent some $4.5bn acquiring leases and assembling equipment, before the costs incurred for the Kulluk salvage operation. On 31 January chief financial officer Simon Henry said the final bill – excluding repairs for the Kulluk and a retrofit for the Noble Discoverer – will cost $90m.

In a statement, Shell tried to put a positive spin on the events, saying it would redouble safety efforts and vowing to return to the northern seas. But it is clearly a setback that may make take years to overcome. “We’ve made progress in Alaska, but this is a long-term programme that we are pursuing in a safe and measured way,” Odum said.

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