Bloomberg News

Shell Wins U.S. Permit to Prepare for Arctic Drilling

August 30, 2012

Shell Wins Permit to Prepare for Arctic Drilling, U.S. Says

Royal Dutch Shell Plc can dig a 40-foot hole on the floor of the Chukchi Sea to install equipment that will prevent well blowouts, Interior Secretary Ken Salazar said today. Photographer: Simon Dawson/Bloomberg

Royal Dutch Shell Plc (RDSA) said it will be difficult to complete an exploratory well in the Chukchi Sea off Alaska this year even after the company received a permit to begin limited preparatory work.

Shell will be allowed to drill 1,400 feet under the seabed with the permit granted yesterday by the U.S. Interior Department. The company still needs U.S. Coast Guard approval for a spill-containment barge before a permit can be issued to drill about 4,000 feet deeper, into oil reservoirs.

For the company that spent $4.5 billion to explore the Chukchi and Beaufort seas time is running out -- it takes at least 20 days to complete a well and Shell has to stop drilling in the oil-bearing zone in the Chukchi Sea by Sept. 24. The company asked for an extension, a request the Interior Department said it is still considering.

Completing a well in the Chukchi “will be very, very difficult without the extension,” Pete Slaiby, Shell’s head of Alaska operations, told reporters during a conference call from Anchorage yesterday.

Shell, which initially planned five wells this year, was delayed by ice and getting approvals for a barge it plans to use for oil spill containment.

Shell expects the Noble Discoverer drilling rig to arrive on drilling site in the Chukchi Sea today and start the preparatory work next week, Slaiby said. The work allowed under yesterday’s permit accounts for about two weeks out of the time required for an exploratory well, he said.

Coast Guard

The company has yet to get the U.S. Coast Guard certificate for the barge and Interior Department permit to drill into the oil fields.

Environmental groups, which oppose Arctic drilling, criticized the decision to allow Shell to do preparatory work, saying that even shallow drilling is risky and problems with the barge show that Shell is unprepared to operate in extreme Arctic conditions.

“It is disappointing that our government continues to bend over backward to accommodate a company that is still not ready to drill,” Michael LeVine, senior counsel for Washington-based group Oceana, said in an e-mail today. “There is no price tag on the Arctic. No matter how much money the company spends or how many vessels it mobilizes, Shell should not be allowed put the Arctic Ocean at risk.”

Interior Secretary Ken Salazar said drilling to 1,400 feet is safe, and that the agency will ensure Shell will meet all requirements before it’s allowed to reach to the offshore oil fields.

“We are holding Shell’s feet to the fire,” Salazar said during a conference call yesterday. “We don’t even know if there is going to be exploration.”

While work in the Beaufort Sea can continue until the end of October, the company hasn’t obtained a permit to start preparatory drilling there. It is seeking one.

To contact the reporter on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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