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The Kulluk Leaves Dutch Harbor for the Beaufort Sea

Shell Oil Pushes Ahead with Arctic Drilling: The Kulluk Leaves Dutch Harbor for the Beaufort Sea

Rhonda McBride11:14 p.m. AKDT, August 21, 2012
ANCHORAGE, Alaska—

Shell Oil could be gambling big with its latest move. Its Kulluk drilling ship left Dutch Harbor on Monday, heading to the Arctic on an uncertain journey. Shell says its second ship, the Noble Discoverer, should also leave Dutch Harbor sometime this week.

Despite this, federal permits are not yet in hand to drill individual wells — and an oil spill response barge, the Arctic Challenger, sits in a Bellingham, Washington shipyard. Drilling cannot begin until it’s stationed in the Arctic.

Finally, Shell says, all of the pieces are coming together.  It expects the Coast Guard and the American Bureau of Shipping to complete its final tests and inspections of the Challenger within the next few days.

“This is no shot in the dark,” says Pete Slaiby, vice president of Shell Alaska. “These things have been planned for six years.”

From Arctic ice that stubbornly refused to retreat, to a mishap in which the Nobel Discovery lost its mooring in Dutch Harbor, Shell has had a number of setbacks this summer — not to mention a recent scolding from the United States Interior Secretary, who says Shell’s delays this season are the company’s own fault.

“People are saying, ‘Are you frustrated?’ Actually I get that question too much. The answer is ‘Really no,’” says Slaiby. “Because we really know we are going to work through these remaining issues.”

Environmental groups like the Biological Center for Diversity say Shell’s track record doesn’t inspire confidence.

“Shell’s really jumping the gun, moving its ships into the Arctic,” says Rebecca Noblin, director of the Center’s Anchorage office. “Ideally you wouldn’t be drilling in these kind of harsh conditions without being absolutely certain that you have your ducks in a row, and we just don’t have that here.”

Noblin and others who oppose Arctic drilling say Shell was wrong to push forward before clearing all of its regulatory hurdles.

So what happens if those requirements aren’t met?

“Worse comes to worse, they’ll have to come home. That would be a huge loss,” says Tim Bradner, a longtime observer of the oil industry and a natural resources reporter for the Alaska Journal of Commerce. “It’s been a huge gamble moving the ships out of Dutch Harbor. The whole thing has been a gamble.”

Shell has already invested more than $4 billion dollars in getting to this point, but the payoff, says Bradner, could be tremendous, not just for Shell but for the state of Alaska.

“You talk to government geologists, and they see the Chukchi Sea as the future Gulf of Mexico,” says Bradner. “Perhaps, but we won’t know until we drill out there.”

Bradner says the state also needs to know what its resources are in the Arctic — and exploratory drilling is the only way to answer a question that’s key to its future.  He says oil from the Beaufort Sea, which is 15 miles from North Slope oil infrastructure, could be one of the fastest ways to keep enough oil flowing through the Trans Alaska Pipeline.

Bradner says people forget that Shell explored the Beaufort and Chukchi seas in the 1980’s and 1990’s and made discoveries, but at the time it wasn’t economic to develop the leases.  The advent of seismic testing has given Shell a better idea of how much oil lies underneath Arctic waters.

“If they find what they think is there, it’s going to create a tremendous momentum,” says Bradner.

For now, Shell is ready to seize the day, even though its window in the exploration season continues to close.

The company has already scaled down its drilling plan to two wells, one each in the Beaufort and Chukchi Seas.  But even if it doesn’t accomplish this goal, Shell hopes to set the stage for next year.

“The ability to go up there, work the logistics, to work the things like crew change, to have a faultless year, will just be a success,” says Shell Alaska’s vice president Pete Slaiby. “I think success builds on success.”

The definition of success, though, differs among those who make the Arctic their home and others who seek to protect it.  If oil is found this season, it would generate a new series of regulatory hurdles for Shell. The company concedes it might take another decade to develop any discoveries.

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