Article by a former employee of Shell Oil USA

UPDATED WITH COMMENTS AND MORE INFORMATION

December 4, 2010

I would like to point out that Shell Oil USA (and other operators) safely drilled a number of exploratory wells in the Arctic waters of offshore Alaska in the late 1980’s and early 1990’s without mishap. These wells were drilled in areas Shell now wants to drill. In some cases, these new wells will be delineation wells for discoveries already made by Shell and others.
 
However, RD Shell’s contentions that they are drilling in shallow water, not mile deep water, and that drilling is therefore much safer, ring hollow given Shell’s past and ongoing record in the shallow Gulf of Mexico, and even onshore. If water depth was the critical criteria Shell’s shallow water and onshore drilling operations worldwide should be ‘defect free’. They are far from that. Safety issues continue even onshore. And we only need to recall the Bay Marchand blowout in 1970 in very shallow Gulf of Mexico waters to understand that water depth is no guarantee of either safe drilling or production. That blowout was due in large part to an effort by Shell USA to develop that field as cheaply and quickly as possible.
 
However, given all the scrutiny that has fallen upon the oil industry for its slipshod ‘safety culture’ (if any real ‘safety culture’ actually exists) since the BP disaster, Shell and their partners could most probably be trusted to safely drill their desired exploration wells in both the Chukchi and Beaufort Seas.
 
Actually, the US government is legally obligated to let Shell and its partners drill at some point in time. If just cause is found that would prohibit that exploratory drilling, then Shell, et al, should be refunded their lease payments, with interest. The government must act in good faith in this regard.
 
Clearly, any mishap/screw-up by RD Shell or others that caused any sort of ‘significant’ release of hydrocarbons into the fragile Arctic environment would doom any further drilling in those regions for decades to come. RD Shell along with the rest of the industry are well aware of that reality. In fact, drilling in the Alaskan Arctic must be a ‘mishap free’ affair, for there will now be no tolerance for ‘typical’ industry conduct after the BP Affair.
 
Exploratory drilling is a very short term endeavor. The bigger concern, and one that has yet to be adequately addressed, is how to exploit any significant reserves that may be discovered without serious risk and damage to the very fragile Arctic environment. That is by far the more serious and more problematic issue the government, RD Shell and the oil industry face. RD Shell and the oil industry have yet to demonstrate they can meet the technical challenges and operate safely.
 
One need only look at how BP and their partners (Exxon, et al) have operated on the North Slope and have maintained the Alaska pipeline over the years to see where the industry has placed and continues to place its priorities. And we only need to look to the Russian Arctic to see what the consequences of serious releases of hydrocarbons will be. That is not a matter of speculation. And Shell USA’s past operational record in Alaska, RD Shell’s environmental record in the Arctic in Russia are indicative of the company’s attitude toward environmentally safe operations in the Arctic. Shell USA had diesel fuel spill issues associated with the improper abandonment of discovery wells (induced by improper internal ‘reserve bookings’ issues) at a prospect called Seal Island (now renamed Northstar by BP I believe). And recently the Russian government took harsh action against Shell as a consequence of environmental issues at Sakhalin II. How RD Shell operates and has operated in the Alaskan and Russian Arctic are very relevant because this conduct is indicative of Shell’s corporate attitude regarding environmental issues. And this is senior level management’s attitude. After all, they lead that company.
 
While Shell and others may indeed be allowed to drill exploratory wells, there is absolutely no guarantee that they will be allowed to develop any reserves that may be discovered. Any such effort will ultimately end up in US courts and face legal challenge after legal challenge. I question whether they would ever be allowed to exploit those discoveries at anytime in the near future. It could take decades, literally, for the resulting political and legal challenges to be overcome.
 
Given the continuing development of massive gas reserves in the lower 48 States, and the rather limited potential for oil in the Alaskan Arctic offshore, estimated to be around 20 billon bbls, I don’t see any real imperative to develop those known gas and oil reserves given the potential ecological damage that could occur from slipshod industry operating practices. These oil reserves are spit in the bucket compared to the exploitable onshore oil sand reserves in Alberta and Venezuela. And there are serious environmental damage issues associated with the development of those reserves as well.
 
To further exacerbate the problem of drilling in the Alaskan Arctic is the fact that the US government has no agency capable of regulating the oil industry effectively. The Dept. of the Interior has been and is completely compromised by the coziness between the oil industry, politicians, and senior bureaucratic leadership. A great example of this completely improper relationship is the Gale Norton affair, and the other associated ‘sex and drug’ scandals that rocked MMS in recent years. DoI operates more like the corrupt bureaucracy of a third world country than they do of a modern democracy based upon the rule of law. And Shell has had a big hand in the deliberate corruption of that bureaucracy.
 
The modern US Republican party was born in large part in Harris County, Texas, home to Houston, Texas, the one-time capital of the world wide oil industry and still the capital of the US and North American/South American oil industries. The coziness between the oil industry and the modern Republican party is legendary. However, large sums of oil industry money flow to both political parties and to lobby organizations who effectively gut the regulatory power of governmental agencies and prevent the establishment of an effective regulatory agency.
 
Until the impotence of the US government to effectively regulate the oil industry is remedied, I see no possibility of development of hydrocarbon reserves in the Alaskan offshore, regardless of how much oil and gas may be discovered. The arrogance and corrupting influence peddling of the large major oil companies, which ultimately led to/contributed to BP’s latest offshore disaster have doomed that possibility. read more