Faced with iced-in Arctic waters and failure to secure U.S. Coast Guard approval of its oil-spill barge, Royal Dutch Shell* is ratcheting down its plan to drill as many as five exploratory wells this summer in the seas north of Alaska.
The company planned to sink the wells in the Chukchi and Beaufort seas during a brief window between July and October, when the waters were expected to be clear of severe ice. But Pete Slaiby, Shell’s vice president for Alaska operations, said it’s unlikely the company will be able to meet that goal due to regulatory challenges and stubborn ice.
“We are still hopeful that we will get some wells drilled,” Slaiby said. “Considering what we’ve been through . . . I think doing any kind of drilling will be a success.”
With global oil demand expected to rise in the long term, and conventional production in decline, international and national fuel companies have turned increasingly to more challenging exploration and production. The Arctic has become a prized frontier, holding 13 percent of the world’s untapped oil and 30 percent of undiscovered natural gas, according to the U.S. Geological Survey. Russia and Norway also have been forging into Arctic seas for oil, but no development has been more closely watched than Shell’s plan for drilling off Alaska’s coast. Yet Shell’s diminished Arctic expectations show that even before rigs enter this unchartered territory in search for oil, the challenges for drilling are formidable.
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While Shell waited for Arctic ice to clear, the company faced numerous setbacks. In June, Shell announced that generators on its Noble Discoverer drilling rig could not meet Environmental Protection Agency (EPA) emission standards for nitrous oxide and ammonia, and asked the agency for a permit revision. In mid-July, the Discoverer slipped its anchor in Alaska’s Dutch Harbor and drifted perilously close to the shore. Although Shell said there was no damage to the ship, the incident offered ammunition to the company's critics. And the company still does not have Coast Guard certification of its oil-spill containment barge, Arctic Challenger, a key piece of equipment for the project. The barge remains docked in Bellingham, Washington, where it has been plagued with construction delays.
Slaiby said he expects these final issues to be worked out soon. He said he does not expect the elevated generator emissions on the Noble Discoverer to hold up drilling. And he said preliminary tests of the oil-spill containment barge would begin this weekend. Drilling, he predicted, would not begin until early August or later.
It has been seven years since Shell obtained its first leases for U.S. Arctic exploration. The project was delayed after BP’s Deepwater Horizon oil spill in the Gulf of Mexico. The planned Arctic drilling is in shallow waters, but the Chukchi Sea in particular is pristine, and the project faces intense scrutiny by environmental groups. Native Alaskans rely on the ocean for food. And environmentalists say oil-spill response techniques in icy waters remain untested. A major spill would have catastrophic consequences.
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“It’s just a really, really risky business,” said Marilyn Heiman, director of the Pew Environment Group’s U.S. Arctic program.
Heiman said Shell has gone far beyond regulatory requirements in its preparation, and she applauded its agreement to leave the drilling area during the fall whale-hunt season. But Heiman said stricter drilling regulation is necessary so companies that follow Shell into the Arctic know exactly what is required. “We cannot do regulation by volunteerism,” she said.
Despite Shell’s intense preparation, Heiman questions whether the company is truly ready to safely drill. If an oil spill happened in the weeks before Shell’s window for drilling closes, Heiman worries the company might not be able to cap and contain the oil before the high winds, thick ice, rough seas, and winter darkness arrived. And because oil from a spill would likely wash to shore in remote areas with few roads, Heiman doubts Shell would be able to respond quickly. The Noble Explorer slipping its anchor this month “does not inspire confidence” in Shell’s planning and preparation, she said.
Writing an opinion piece in National Journal magazine this week, Michael Bromwich, the government’s former top drilling regulator appointed by President Barack Obama in the wake of the Deepwater Horizon disaster, said Shell should be allowed to drill only if it meets EPA, Coast Guard, and Department of the Interior requirements. Bromwich said the “risks of an oil spill are extremely small,” but added that the “final approval lies in the hands of Mother Nature and whether the sea ice melts in time.”
The sea ice situation is complex and dynamic. Due to an unusually cold winter, Arctic sea ice this spring reached its highest level in a decade, according to the U.S. National Snow and Ice Data Center. Ice thawed rapidly in June, and there are expanding areas of open water throughout the Beaufort Sea, the center reported this week. But ice cover is considered normal in the Chukchi Sea, with the thaw at the edge of the multiyear ice pack.
According to Shell, the Arctic project has already cost $4.5 billion for leases, personnel, construction and equipment. But the payoff could be huge, if the company’s drilling rigs find oil.
Regardless of when the Arctic ice recedes, Shell is likely to return to the Arctic next summer to resume drilling. The company initially planned to sink up to ten exploratory wells—five each year. But Slaiby said it is possible that wells started in 2012 could be abandoned for the winter and finished in 2013. In light of the ice and regulatory struggles, he said, sinking a single well could be seen as success.
“The fact that we are going up there and drilling is huge for us,” he said. “If we get one, that is just icing on the cake.”
* Shell is sponsor of National Geographic's Great Energy Challenge initiative. National Geographic maintains autonomy over content.