Shell to Abandon Arctic Oil Exploration Plans for 2013

Since winning licenses to drill for oil in Alaska’s Beaufort and Chukchi Seas in 2005, Royal Dutch Shell (NYSE: RDS.A)has spent $4.5 billion, yet all of its efforts have been met by setback after setback at every turn. Shell has now decided to call off all Arctic drilling activity this year giving it time to prepare fully for the 2014 season.

Shells operations in the Arctic are being closely followed by many in the industry to try and determine whether the risks are worth the reward, so taking time to be extra sure that everything is ready is a sensible strategy.

After spending several years developing the correct equipment that could operate in the extreme environment found in the Arctic, and jumping regulatory hurdles to prove its ships and rigs were ready, Shell began exploration last year.

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During the year one of its rigs grounded just off the coast of Kodiak Island, and the other came perilously close to grounding in Unalaska Bay after it slipped its anchor. Support vessels and safety equipment also experienced problems; the containment dome, an important part of the equipment needed to deal with oil leaks, failed to earn important certificates, a fire broke out on the Noble Discoverer, and the Aiviq tow ship experienced engine failures.

Earlier this month Shell announced that both of its drill rigs were being sent to Asia for repairs, and now they have decided to forego the entire Arctic drilling season, which starts in just a few weeks, in order to “give us time to ensure the readiness of all our equipment and people,” according to Marvin Odum, director of Upstream Americas.

By. Joao Peixe of Oilprice.com