Shell Oil's drilling unit the Kulluk ran aground, battered by waves, on an island south of Anchorage, Alaska, after breaking free of its moorings.

Three Oil Giants Suspend Chukchi and Beaufort Sea Drilling Plans


Three major oil companies have abandoned drilling plans off Alaska for the time being, either suspending exploratory efforts indefinitely or scuttling them completely pending further study.

Royal Dutch Shell started the trend by nixing its 2013 Arctic offshore drilling plans altogether because of equipment problems, the company announced on February 27. About a week later, Norwegian conglomerate Statoil said it would hold off on drilling until at least 2014. Most recently, ConocoPhillips announced on April 10 that it was suspending its plans to drill exploratory wells off Alaska’s Arctic coast in 2014.

Environmentalists and the United Nations have urged that such drilling be stopped because of volatile climate conditions in the Arctic and what they feel is the companies’ lack of preparation. On April 10 the U.S. government cautioned oil companies that they must have emergency equipment on hand that can rope in a rogue subsea oil well, the Houston Chronicle’s energy blog FuelFix.com reported, quoting Deputy Interior Secretary David Hayes.

Concerns have been fueled by a string of malfunctions and misfortunes that Shell suffered over the course of 2012. Having fought for years to get permits, the company had to suspend its first stab at the ocean floor last summer about 24 hours after beginning to drill, because of an ice floe that got within striking range. (Related: Arctic Drilling: Ice Floe Stops Shell's Noble Discoverer From Biting Into Bottom of Chukchi Sea)

Equipment damage followed, including the rupture of a spill-containment system as it was being tested for deployment back in Washington State. Then a drill rig broke loose in the Chukchi Sea and had to be towed to a remote island. Soon afterward, Shell announced it was suspending 2013 drilling attempts. On New Year’s Eve a fire broke out on another rig. (Related: Arctic Drilling: Shell Nixes Exploratory Chukchi Sea Wells Till 2013 Season)

“We’ve made progress in Alaska, but this is a long-term programme that we are pursuing in a safe and measured way,” said Marvin Odum, director of Upstream Americas, Shell’s gas and oil exploration arm, in a statement. “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.”

Soon afterward, Shell signed agreements with Russia to drill off its shores, according to the Alaska Dispatch.

Likewise Statoil, though it remains active in other countries’ Arctic climes, has backed off as well.

“We are taking a break in Alaska,” Chief Executive Bill Maloney said to Bloomberg, according to the environmental nongovernmental organization Bellona, based in Norway. “We do not anticipate any production from the Arctic in our production forecasts.”

For its part ConocoPhillips said high costs and an uncertain regulatory outlook were its main reasons for standing down, The Epoch Times reported. At the same time, new state tax regulations have prompted the company to increase its investments on Alaska’s North Slope, ConocoPhillips Alaska said in a statement on April 17.

“We welcome the opportunity to work with the federal government and other leaseholders to further define and clarify the requirements for drilling offshore Alaska,” said ConocoPhillips Alaska President Trond-Erik Johansen. “Once those requirements are understood, we will re-evaluate our Chukchi Sea drilling plans. We believe this is a reasonable and responsible approach given the huge investments required to operate offshore in the Arctic.”

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