Shell Oil’s 2012 Arctic Drilling Window Closing

On Monday, Interior Secretary, Ken Salazar, wrapping up a trip to Alaska’s North Slope and the offshore Arctic areas where Shell is hoping to drill late this summer, held a press availability:

The opportunity for Shell Oil Co. to drill exploratory wells this year in Alaska’s Arctic is rapidly diminishing and it’s a situation of Shell’s own making, Interior Secretary Ken Salazar told reporters in Alaska on Monday.

While delays already have led Shell to scale back plans for drilling a total of five wells this year in the Chukchi and Beafort seas, Shell maintained through a spokesman that there’s still time before freezeup to complete some wells and begin work on others.

The main holdup has been transforming a 38-year-old barge into an oil spill containment vessel. Shell also has been dealing with lingering sea ice and challenges with an air emissions permit for a drilling rig.

Salazar spent the weekend in Alaska touring the North Slope and flew some 40 miles over sea ice and water north of Barrow. While he saw significant sea ice, he said that the area around Shell’s most promising prospect, the Burger find in the Chukchi Sea, was clear.

The oil spill containment vessel, now called the Arctic Challenger, is a condition of Shell’s approved exploration plan and must pass Coast Guard inspections and an in-water test before it can be certified for the Arctic, officials have said.

“If they had got it done, they may already be up there today,” Salazar said. “Because the waters in the Chukchi around the so-called Burger find are in fact already open. So it’s not a matter of ice. It’s a matter of whether or not Shell has the mechanical capability to be able to comply with the exploration effort that had been approved by the government.”

I wrote here last week that the “Chances of Shell Oil Drilling in Arctic in 2012 [are] Diminishing by the Hour.”  It didn’t seem as obvious then as it might seem now to Salazar, having toured the potential drilling areas.  And today, Kim Murphy, writing another article for the Los Angeles Times about the trouble-plagued oil recovery vessel Arctic Challenger, notes:

The company’s hoped-for target of finishing the reconstruction by Aug. 15 now has been pushed back to Aug. 30, according to sources familiar with the work. Coast Guard officials said several major systems still remain to be completed before certification can occur.

“At the end of the day, the question is: Is the Arctic Challenger any closer to obtaining a certificate of inspection? The only way to accurately reflect that is through completion of major systems and major subsystems. And as of this moment, I don’t think we’ve made any progress since last Monday,” Coast Guard spokesman Cmdr. C.T. O’Neil told the Los Angeles Times.

As of last week, the Coast Guard said about 400 inspection and plan review items remained to be satisfied, all relating to the design, construction and installation of safety, structural, mooring and machinery systems.

As noted today at the blog, Government Executive:

Earlier this summer, Salazar suggested that the Interior Department would make a final determination on Shell’s drilling permits in the Arctic by Aug. 15, and with that deadline not far off there had been some anticipation that Salazar might announce the permit approval on Monday.

But with Shell’s containment barge still subject to Coast Guard certification and time running out, Salazar said that “over the next several weeks, some final decisions will be made.” Salazar wouldn’t say when it might be too late for Shell to move forward with its exploratory drilling program, but noted that “we don’t have a lot of time.”

Shell is required to be out of the Chukchi Sea by Sept. 24 in advance of the harsh Arctic fall and winter and out of the Beaufort Sea by the end of October.

While some lawmakers and drilling advocates have suggested that Interior consider pushing back the end of the drilling season due to the unusually heavy ice conditions in the Arctic earlier this summer, Salazar insisted that Shell’s holdup is “not a matter of ice.”

Salazar noted that the Arctic drilling season is “a very dynamic situation” in which “conditions are rapidly changing.” Therefore, he said, “we don’t know what will be happening this summer.” [emphasis added]

Shell has dispatched two vessels from Dutch Harbor to the Chukchi Sea. The icebreaking tug Tor Viking II is in the Chukchi Sea, headed toward two drilling sites, to set sea anchors for the drilling rigs Noble Discoverer and Kulluk,  Those rigs are moored in Dutch Harbor, along with the support vessels Fennica(an icebreaking multi-purpose vessel) and Nanuq.  Pre-positioned and moored in Kotzebue Sound (north of the Bering Straits, at the gateway to the Chukchi Sea) is the oil tanker Affinity, which Shell has leased or purchased to hold rather large amounts of spilled oil.

Although the Tor Viking II is allowed to set anchors for the two drill rigs,  the rigs themselves cannot begin drilling until the Arctic Challenger is positioned near any exploratory well sites.

When I was on a crew that towed the Arctic Challenger from Seattle to Pt. Barrow in 1982, we left Seattle on July 17th and arrived at Pt. Barrow on August 8th.  That was 22 days.  We took the Inside Passage, which slowed us, and left from Seattle, instead of Bellingham, which is 70 miles north of the former port.  The Arctic Challenger will be towed directly from the Straits of Juan de Fuca to Unimak Pass, which will probably take nine days.  Another six will get it to the Chukchi Sea, unless the Coast Guard requires the vessel to stop in Dutch Harbor for an interim inspection.

So, if the Arctic Challenger has no more delays than those already encountered, it will arrive at the drilling site no earlier than September 16th for a drilling season required to end “by Sept. 24 in advance of the harsh Arctic fall and winter.”

What this adds up to is a very, very expensive eight-day drilling season.

I’m predicting Shell will end up holding off until 2013.

image:  Arctic Challenger under tow 1982, by Philip Munger