February 12, 2013 9:32 am

Fresh doubts about Shell’s Alaska plans

Royal Dutch Shell’s two Arctic drilling rigs are being sent to Asia for assessment and repairs, raising fresh questions about whether it will be able to pursue its drilling programme off the north coast of Alaska this summer as planned.

The decision, forced by problems with both rigs, implies extra expense and possible delays for an Arctic exploration campaign that has already cost about $5bn and been delayed six years from when the company hoped to start drilling.

The Kulluk, the rig owned by Shell that ran aground on New Year’s eve after breaking free from the vessel towing it, is being taken to an as-yet unspecified shipyard in Asia for inspection and repairs of the damage it has suffered.

The Noble Discoverer, a drill-ship owned by Noble, the offshore drilling company, and under contract to Shell, is also being sent to Asia, to a shipyard in South Korea, for repairs. It was criticised and put under investigation by the US Coast Guard last year, after returning from drilling for Shell in the Chukchi Sea off the northwest coast of Alaska in September.

Noble said late last year the Coast Guard had identified several problems on the drill-ship, including its propulsion and safety management systems. Noble also reported “other potential regulatory non-compliance issues”, including unauthorised water discharges.

Both rigs will be taken from Alaska to Asia under “dry tow”, lifted out of the water on special vessels. The journey will take two to four weeks.

The planned work on the rigs follows a series of setbacks including law suits from environmental groups, objections from regulators and problems with equipment.

The US interior department is expected to report next month on its review of Shell’s Arctic drilling plans. The department said it would pay “special attention” to the problems of the Kulluk and the Noble Discoverer.

In a statement, Shell said: “We have not made any final decision on 2013 drilling in Alaska . . . In addition to the drilling rig assessments/repairs, a number of investigations and reviews are under way. It’s too soon to know what the outcomes of those investigations will be. In the meantime, we are exploring a range of options for exploration work offshore Alaska in 2013.”

Shell was allowed last year to drill only two “top holes” – upper sections of wells that stop thousands of feet away from oil-bearing rocks – because it could not satisfy US regulators of the reliability of its equipment for catching oil in the event of a leak on the seabed.

Shell refused to comment on whether it could deploy other rigs in the Arctic this year.

Analysts say that while there are other Arctic-capable rigs that might be available, it would not be easy for Shell to secure the contracts and regulatory approvals needed for them to be used this summer.

Shell has always made it clear that it would have two rigs working in the Arctic at a time, in case one had a problem and the other was needed to drill a relief well to block a leak.

Peter Voser, Shell’s chief executive, said last month the company was still committed to developing Arctic oil reserves.

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