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Originally published Monday, September 17, 2012 at 6:53 PM

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Shell's Arctic offshore drilling suffers setback

Shell is limiting Arctic drilling off Alaska to just preparation work this year after suffering several setbacks, but the company says it remains optimistic about the project's prospects.

Associated Press

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ANCHORAGE, Alaska —

Shell is limiting Arctic drilling off Alaska to just preparation work this year after suffering several setbacks, but the company says it remains optimistic about the project's prospects.

Netherlands-based Royal Dutch Shell PLC said earlier Monday that a containment dome required to be in place before drills can enter oil-bearing rock in the Chukchi and Beaufort seas was damaged Saturday during testing off Bellingham, Wash.

Environmental groups quickly blasted the company, saying the latest setback and others are evidence the oil industry cannot safely drill in the Arctic.

Marvin Odum, president of Shell Oil Co., Royal Dutch Shell's U.S. subsidiary, told The Associated Press that although the company no longer plans to drill deep enough to reach oil this year, it has made great strides with its exploratory wells off the Alaska coast.

"That drilling is going to be limited to top holes, but that is a tremendous step forward in terms of this multiyear exploration program in the Alaska Arctic," Odum said.

The dome and Shell's oil spill containment barge, the Arctic Challenger, are required to be positioned near the company's drill ships before they drill into hydrocarbon zones.

Shell already faced a rapidly closing window for drilling during the open-water season - when the seas are mostly free of ice - and the damaged dome was the clinching impediment.

Odum would not speculate on the cause or extent of damage.

"There is an investigation going on right now to actually put the details behind it," Odum said. "I'm going to wait for that report, which shouldn't take very long."

Shell hopes to tap into federal estimates of 26 billion barrels of recoverable oil and 130 trillion cubic feet of natural gas in U.S. Arctic waters. Odum remains optimistic.

"We're exploring offshore Alaska for the first time in several decades, and we have two drilling ships out there and over 20 support vessels, some of which were purpose-built for the area," he said. "We're drilling in the Chukchi, and I expect we'll be drilling in the Beaufort soon."

Environmental groups strongly oppose Arctic offshore drilling, claiming oil companies have not demonstrated the ability to clean up spilled crude in ice, and that operating in one of the world's most hostile marine environments is a risk to its polar bears, walrus and endangered whales. They pounced on the latest Shell setback.

"This series of blunders inspires anything but confidence in the oil industry's ability to safely drill in the Arctic," said Susan Murray, Oceana's Pacific senior director.

A Shell drilling ship in July dragged its anchor and nearly ran aground at Dutch Harbor. Less than a day after a Shell drill ship began drilling a pilot hole Sept. 9 in the Chukchi, a 30-by-12-mile ice sheet heading toward the vessel forced it to move 30 miles south.

"These last few weeks confirm that drilling can't be done safely for one month, much less long-term," said Rebecca Noblin of the Center for Biological Diversity.

Odum said he understands the critics but that the containment system, which didn't exist before Shell put it together for the Arctic, is one aspect to be solved in a multiyear exploration plan.

"If you look at the entirety of this program, you see the strength and the capacity with which Shell has moved back into the Arctic," he said.

Shell will continue working on the containment barge and plans to have it operating in the Arctic this year, he said.

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