Shell abandons 2013 Arctic drilling programme

28 February 2013

Royal Dutch Shell said on February 27 it had suspended its 2013 drilling season in the Arctic waters off Alaska but added it remained committed to drilling at a later time, probably in the summer 2014 season. This announcement follows a series of mishaps and mechanical failures in 2012 which has led to a high-level US Government review.

"We've made progress in Alaska, but this is a long-term program that we are pursuing in a safe and measured way," Shell's president, Marvin Odum, said in the statement. "Our decision to pause in 2013 will give us time to ensure the readiness of all our equipment and people."

Shell had a difficult and costly first season of hunting for oil in 2012 after eight years of preparation and $4.5bn spent securing permits and setting up the infrastructure to drill two exploratory wells in the Chukchi and Beaufort seas.

In July 2012, the Shell-leased drill ship Noble Discoverer briefly drifted out of control near Dutch Harbor, Alaska, and two months later, Shell's purpose-built Arctic oil spill containment system proved unsuccessful in a test in relatively calm waters off Seattle. In November, the Noble Discoverer reported an engine room fire and propulsion problems. Finally, on New Year's Eve, Shell’s conical drilling rig Kulluk, ran aground off the Alaskan coast after being separated from its tow vessels in 70mph winds and high waves.

The company said both the Kulluk and Noble Discoverer would have to be towed to dry docks in Asia for repairs before they could return to the Arctic.

Shell's spokesman in Alaska, Curtis Smith, said the company's future plans for the Arctic would depend on getting the two ships back in working order. "Our future exploration plans offshore Alaska will depend on a number of factors," he wrote, "including the readiness of our rigs."

The federal government had barred Shell from drilling into oil-bearing rocks last summer, because of the failure of its oil spill containment system. The company, which was limited to drilling to about 1,500ft, had hoped to return to finish off those holes in 2013.

Shell's decision to call time on Arctic drilling for 2013 pre-empts the anticipated release next week of a high-level Department of the Interior review of Shell's first year of operations in the Arctic. The review will focus specifically on Shell's mechanical breakdowns in the Arctic, and possible safety and environmental lapses. The US Interior Secretary, Ken Salazar, said soon after ordering the review that he had doubts about whether drilling could be safely conducted in the Arctic at all.

A Coast Guard investigation found 16 safety and environmental shortcomings on the drill ship and rig.

The US Geological Survey estimates the waters in the Arctic contain about 90bn barrels of recoverable oil.

Odum said that Shell was determined to return. "Shell remains committed to building an Arctic exploration program that provides confidence to stakeholders and regulators, and meets the high standards the company applies to its operations around the world," his statement said. "We continue to believe that a measured and responsible pace, especially in the exploration phase, fits best in this remote area."