This is a BETA experience. You may opt-out by clicking here
Edit Story

After Mishaps, Shell Dials Back Arctic Oil-Drilling Plans

Christopher Helman
This article is more than 9 years old.
English: Illustration of the final chase of Mo...

For weeks now it's been unlikely that Shell would have enough time before the sea freeze sets in to drill down to oil-bearing zones in its newly spudded well in Alaska's Chukchi Sea.

But today Shell made it official, announcing that it would seek only to finish "top hole" work on the Burger A well. It aims only to drill down to 1,400 feet beneath the seafloor, then plug and seal the hole for reentry next year.

Shell spokeswoman Kelly op de Weegh put a brave face on it today in an email to Forbes, writing, "In each season, we'll make the most of the time we have. Achieving top holes this year certainly sets a strong foundation for next year."

But this is a disappointment for Shell, which has spent $5 billion so far on its dream of drilling the Alaskan arctic and had earlier hoped to complete five Alaska wells this year in both the Chukchi and Beaufort seas. Drilling of the Beaufort wells have not yet been approved, and the window of opportunity there closes by Halloween.

Today's announcement was triggered by damage to a piece of equipment called a containment dome that would be lowered to the seabed to trap oil in the unlikely case of a blowout. The damage occurred during a test of what Shell says would be the first-ever containment system deployed in Arctic waters. "It is clear that some days will be required to repair and fully assess dome readiness," said Shell in a statement this morning.

This comes on the heels of a number of other setbacks for Shell this year. There were delays when Shell had to seek a waiver after being unable to meet the EPA's preposterously tight federal air quality standards governing diesel emissions from its ships. There were delays when the Discoverer drillship dragged anchor in Dutch Harbor. There were delays in retrofitting and testing the Arctic Challenger containment barge -- part of that blowout containment system.

But the slog of delays goes back further than that. In 2008 Shell paid more than $2 billion for the rights to drill these prospects. In 2010, when Shell thought it was ready to go, it was stopped by the federal offshore drilling moratorium in the wake of BP's disaster. In 2011 Shell was stalled again by EPA withholding air permits. Perhaps most embarrassing was Shell's social media nightmare earlier this year, when Greenpeace activists hijacked its online image with a hoax site lampooning Shell's "Let's Go" slogan with fake ads like "Why go solar when you can drill polar. Let's Go" and "Birds are like sponges... for oil. Let's Go."

The company has made painstaking studies of the effect its drilling would have on sea life. It has negotiated with indigenous tribes and agreed to halt its activities during the traditional summer whaling season. It excavated a "mud cellar" -- a big underwater hole --  to install well-capping equipment like the blowout preventer and keep it out of the path of icebergs that scrape along the seafloor.

Wisely, Norway's Statoil has chosen to sit back and watch Shell. Statoil in 2008 acquired the rights to 16 blocks Alaska blocks from the federal government, and has also farmed in on 50 tracts held by ConocoPhillips. Statoil has said it won't even think about drilling until 2015 at the earliest.

And Statoil might not bother at all. Earlier this year Statoil, as well as ExxonMobil, forged sweeping joint ventures with Russia's Rosneft, which include requirements to drill in Russia's own Arctic waters. As Rosneft answers to the Kremlin, and President Vladimir Putin has shown great enthusiasm for developing Russia's Arctic offshore, there's little reason for oil companies not to deploy capital where it is more welcomed.

Drilling the Chukchi can be done; Shell drilled four exploration wells there in the 1990s. But what they found wasn't worth developing at the time. Though Shell's earlier efforts were presumably done safely, standards have changed since then.

As Shell spokeswoman Kelly op de Weegh told me today, "We've been working on this critical program for six years. It could be an important national resource for the next several decades, and we are committed to doing it safely and responsibly. We're not going to rush things for the sake of a few days this season."

That's good to hear, because after more than $5 billion sunk into Alaska drilling so far, Shell's efforts could soon take on the tenor of Captain Ahab chasing Moby Dick. Let's hope Shell can see it through to catch this whale, without killing itself in the process. As Starbuck told Ahab: "Moby Dick seeks thee not. It is thou, thou, that madly seekest him!"


Tracking energy innovators from Houston, Texas. Forbes reporter since 1999. 

Kim Kardashian West's Skims To Dress Team USA At 2021 Olympics
Video Player is loading.