Shell says it will 'pause' drilling in Arctic Ocean for 2013

Royal Dutch Shell PLC announced Wednesday that it will suspend its offshore petroleum drilling program in the Arctic Ocean for 2013, taking a break to make sure it can do so safely.

2012 drilling was plagued by problems

The conical drilling unit Kulluk was grounded 64 kms southwest of Kodiak, Alaska, in 2012. (U.S. Coast Guard/Petty Officer 2nd Class Zachary Painter/Reuters)

Royal Dutch Shell PLC announced Wednesday that it will suspend its offshore petroleum drilling program in the Arctic Ocean for 2013, taking a break to make sure it can do so safely.

The company announced it will "pause" exploration in the Chukchi Sea off Alaska's northwest coast and in the Beaufort Sea off the state's north coast to prepare equipment and vessels for drilling in the future.

"We've made progress in Alaska, but this is a long-term program that we are pursuing in a safe and measured way," Shell Oil Co. President Marvin Odum said in the announcement. "Our decision to pause in 2013 will give us time to ensure the readiness of all our equipment and people following the drilling season in 2012."

Environmental groups opposed to drilling cheered the announcement.

"This is the first good decision we've seen from Shell," said Mike LeVine, an Alaska spokesman for Oceana. "Given the disastrous 2012 season, our government agencies must take advantage of this opportunity to reassess the way decisions are made about our ocean resources and to reconsider the commitment to explore for oil in the Arctic Ocean."

16 safety violations found by coast guard

Shell completed top-hole drilling on two wells in 2012 in the Beaufort and Chukchi seas, but the first drilling in more than two decades was plagued by problems before and after the short summer open-water season.

The company's spill response plan required a spill response barge to be on site before drill bits dug into petroleum-bearing zones. That never happened. A key piece of equipment, a containment dome, was damaged in testing off the Washington coast.

Seasonal ice in the Chukchi Sea delayed Shell vessels from moving north. When Chukchi drilling began Sept. 9, a major ice floe forced Shell's drill ship off a prospect less than 24 hours later.

When the drilling season ended, the Coast Guard announced that it had found 16 safety violations when the Noble Discoverer, which drilled in the Chukchi, was in dock in Seward, Alaska. The Coast Guard said last week that it has turned its investigation of the vessel over to the U.S. Department of Justice.

The problems crested in late December when the Kulluk, a round Shell drilling barge designed for use in sea ice, broke away from its towing vessel on its way to a Pacific Northwest shipyard in Washington state.

The Kulluk ran aground off a remote Alaska Island near Kodiak Island. It was pulled off six days later but requires repairs. The Kulluk left under tow Tuesday for the Aleutians Island port of Dutch Harbor, where it will be loaded onto another vessel for transport to a shipyard in Asia. The Noble Discoverer also will undergo maintenance and repairs in Asia.

Interior Secretary Ken Salazar has announced that his department would perform an "expedited, high-level assessment" of the summer drilling season. Salazar said the review would pay special attention to challenges that Shell encountered with the Kulluk, with the Noble Discoverer and with the company's oil spill response barge. The Interior Department oversees offshore drilling permits, and Salazar said drilling in frontier areas such as the Arctic demand a higher level of scrutiny.

The Coast Guard also is reviewing the grounding of the drill vessel. Rear Adm. Thomas Ostebo said the investigation will look at every aspect of the incident, from possible failure of materials to evidence of misconduct, inattention or negligence.

Drilling could resume in 2014

Shell has said the grounding was a maritime transport problem. Drilling in 2012, Odum said Wednesday, was completed safely.

"Shell remains committed to building an Arctic exploration program that provides confidence to stakeholders and regulators, and meets the high standards the company applies to its operations around the world," Odum said. "We continue to believe that a measured and responsible pace, especially in the exploration phase, fits best in this remote area."

Shell Alaska spokesman Curtis Smith said drilling could resume in 2014.

"It's possible, depending on the result of ongoing reviews and the readiness [of] our rigs, and frankly the confidence that lessons learned from our 2012 drilling program have been fully incorporated."

Damage to the Kulluk will be fully assessed at the shipyard.

"Even before we get a closer look at these vessels, we've made an internal decision to pause," Smith said. "The overriding factor is our commitment to a drilling program that meets Shell's high standards for safety and operational excellence."