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Shell Announces Plans to Resume Arctic Oil Exploration in 2014

By Joao Peixe | Thu, 31 October 2013 22:49 | 2

After a disastrous campaign in 2012, which forced the company to abandon all plans for this year, Royal Dutch Shell has announced that it will return to the Arctic waters in 2014 to begin exploring for oil again, but on a much smaller scale.

One of the main differences this time will be the abandonment of the Kulluk conical drilling rig that ran aground last time as Shell tried to toe it back to Port near the end of the 2012 drilling season. As a replacement Shell has leased out the Polar Pioneer, a semi-submersible drilling rig owned by Transocean. The Kulluk may well be put back into operation at some other point in the future, but only if it is deemed cost effective to repair the damaged unit.

Kulluk rig.
Kulluk rig.

Shell has spent eight years and almost $5 billion trying to create a new generation of Arctic oil production. It is the largest project that Shell is involved in, and Simon Henry, the company’s chief financial officer, has claimed that it has the potential to be a multi-billion barrel operation.

Problems experienced during the 2012 Arctic drilling season, specifically the damage suffered by a specialised oil spill continent system, meant that Shell could only perform top-hole drilling for its wells; it now plans to go back and complete the wells.

Related article: What Russia’s Arctic Attack on Greenpeace is Really About

Henry revealed that Shell would soon provide a blueprint to the Interior Department for its plans to resume drilling in the Chukchi Sea, and that no intentions exist to move back to the Beaufort Sea just yet.

“We have not yet confirmed if we drill in 2014,” said Henry. “Clearly, we would like to drill as soon as possible, so we are putting the building blocks in place. There remains a permitting and regulatory process through which we need to go, before we can confirm a decision to actually drill in 2014.”

Despite Shells intentions to return to the Arctic, there still remain several obstacles to overcome before this can be achieved:

Shell must still allow a third-party audit of its management systems, as requested by the regulators.

The blueprint that the company plans to submit for operating in the Chukchi Sea must pass an environmental review and achieve public approval, which Fuel Fix suggests could last for months.

Polar Pioneer.
Polar Pioneer.

And then the Polar Pioneer rig will need to be approved as a back-up drilling rig, so that it can drill a relief well in the case of a leak from a main well.

By. Joao Peixe of Oilprice.com

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  • Sara on November 16 2013 said:
    Very very foolish!

    Shell is not up to the task, if something bad happens the whole world is going to resist this old industry as fast as possible.

    New research is showing more and more the importance of the Arctic and how this is related to extinction of species. Playing with fire will go wrong sooner or later and no paper money will help us out of that mess.
  • Rocky on November 01 2013 said:
    Only a fraction of the fossil fuel reserves already discovered can be extracted and use if dangerous consequences are to be avoided. Investment in exploration for even more to add to the inventory is foolish.

    "A report issued by HSBC identified trillions of dollars at risk in international stock markets that inflate the value of fossil fuels. These resources must remain in the ground to avoid the worst effects of climate change and represent a “carbon bubble” that could plunge the world into another financial crisis if it bursts.

    In fact, HSBC warns 40-60% of total oil and gas industry market capitalization is at risk from the carbon bubble. “Business as usual is not a viable option for the fossil fuel industry,” said HSBC oil & gas analyst Paul Spedding. “Management should already be looking to new business models that reduce the risk of stranded assets destroying shareholder value.”

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