Are Shell's 2013 Drilling Plans Doomed?

Credit: U.S. Coast Guard

Shell's Kulluk oil rig is grounded near Kodiak Island in the Gulf of Alaska, where it came to rest on Dec. 31 after days of struggle in heavy seas. While salvage crews get to work with help from the U.S. Coast Guard, attention turns to the future of offshore drilling in the Arctic Ocean.

The first question for Shell and regulators is whether the company will get to drill in the summer of 2013. Shell's shareholders presumably hope so, while many environmentalists would be relieved at any delay and say Shell's mishaps show the company is not ready to safely drill in the Arctic.

Shell has been trying for years to drill in the Chukchi and Beaufort seas, and it finally seemed ready. In the fall of 2012, Shell used the Kulluk rig and the Noble Discoverer drillship to do "top-hole" drilling in the waters north of Alaska. That means the rigs drilled to more than a thousand feet below the seafloor, cemented casings in place, and installed wellheads. (I was onboard the Kulluk at the end of that process.) Crews planned to return in 2013 to drill down to petroleum-bearing layers at those sites and then to drill additional exploratory wells.

But the grounding of the Kulluk puts the 2013 drilling season in doubt, and not just for political reasons. If the Kulluk is damaged and can't be repaired quickly, it may not be possible to substitute another rig. Any new rig presumably would have to go through a complicated process of permitting and upgrades, assuming one could be found on short notice.

If the Kulluk can't return to the Arctic, neither can the Noble Discoverer. Shell's oil-spill response plans call for a two-rig operation. If a blow-out happened and spewed oil into the water, the second rig could be used to drill a relief well. The Noble Discoverer is the backup for the Kulluk, and the Kulluk is the backup for the Discoverer. If the Kulluk is out of commission as a result of the accident, so is the Discoverer.

There's no report yet on how badly the Kulluk may have been damaged; it may be ready for duty again once the ice melts. Otherwise, Royal Dutch Shell is probably looking at further delays as it seeks to explore for oil in the region.

Even if Shell gets under way in 2013, major oil production is at least a decade in the future. But the ultimate prize is a big one. According to U.S. Geological Survey estimates, 26 billion barrels of oil may lie beneath the seafloor up there. That's as much as all the oil the Prudhoe Bay area contained before production started there in the 1970s and on the same scale as the crude remaining in the Gulf of Mexico.

Source: http://www.popularmechanics.com/how-to/blog/are-shells-2013-drilling-plans-doomed-14936533?src=rss

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