UPDATE 1-US Gulf spill clouds Shell's Alaska drilling plans

Thu May 13, 2010 6:50pm EDT

Related Topics

* MMS seeks more data on safety plans

* Shell investments total $3.5 bln in region

* Environmental groups seek to delay drilling

* U.S. appeals court rules in Shell's favor (Adds 9th Circuit ruling backing MMS approval of Shell plans, paragraph 6, 7)

By Yereth Rosen

ANCHORAGE, Alaska, May 13 (Reuters) - The oil drilling disaster at a BP Plc (BP.L) well in the Gulf of Mexico has cast doubt on Royal Dutch Shell's (RDSa.L) plans to drill for oil thousands of miles away in the Arctic Ocean.

U.S. regulators, under mounting criticism for oversight of the oil industry, are seeking new information about Shell's plans in frontier waters off Alaska, and environmental groups are trying to block new drilling in the region.

Shell says it still plans to drill up to five wells this year in Alaska, an ambitious program years in the making.

"We're still moving forward," spokesman Curtis Smith said.

Shell has invested about $3.5 billion since 2005 on its plan to turn Alaska's lightly explored outer continental shelf into a major oil-producing province. The basins have potential to hold a combined 24 billion barrels of recoverable oil, according to Interior Department estimates.

The U.S. Ninth Circuit Court of Appeals on Thursday ruled that the U.S. Minerals Management Service was right to approve Shell's Alaska plans. Groups fighting the drilling plans in court noted the decision came before the Horizon disaster. They pledged to keep trying to get the government to stop Shell.

"With limited capacity to respond to potential spills and icy, harsh conditions, the Arctic is no place to take our next drilling gamble, especially when there are still so many unknowns - in the Arctic and in the Gulf," the groups said in a statement.

Yet the MMS, having given preliminary approval, does want Shell to take more safety steps in response to the explosion at Transocean's RIGN.S Deepwater Horizon rig that BP hired.

Shell has until Tuesday to respond to a letter last week from MMS Director Elizabeth Birnbaum seeking "detailed information on additional safety measures that the company is proposing to undertake in light of the Deepwater Horizon disaster."

Shell plans to drill about 75 miles offshore in the Chukchi Sea, the often ice-choked expanse between Alaska and Siberia, and the Beaufort Sea several miles off Alaska's north coast.

The company expects to begin moving a drilling rig from the Philippines to Alaska within weeks, and some support vessels may be sent north even sooner, Smith said.

"But obviously we're not going to fully mobilize them unless we know that we're going to have a drilling program this year," he said.

Shell had planned to start drilling in the Beaufort as early as 2007, but legal challenges delayed that program.

SAFER THAN BP PROGRAM?

Smith said Shell's Chukchi and Beaufort Sea drilling programs were safer than BP's Gulf of Mexico projects, noting that Shell's prospects lie in 150 feet of water, far shallower than the 5,000 feet the Deepwater Horizon was working in.

The underwater and reservoir pressures encountered at BP's Gulf well site are three to five times more than those at the Shell-targeted sites, he said.

The Alaska areas are shallow enough to be reached by human divers should a problem emerge, while BP has been forced to use robotic devices at the ruined well site, he said.

But environmentalists say Arctic offshore drilling poses special risks, including remoteness and limited ice-free seasons.

Separately, the Center for Biological Diversity sent notice last week that it is preparing a lawsuit against the Interior Department seeking to block Shell's offshore Alaska drilling, citing alleged oil-spill risks to polar bears, a threatened species.

ConocoPhillips (COP.N) has plans to drilling in the Chukchi as early as 2012. Norway's Statoil (STL.OL), which entered a partnership with ConocoPhillips, also holds leases, as do Italy's Eni (ENI.MI) and Spain's Repsol (REP.MC). (Additional reporting by Braden Reddall in San Francisco; Editing by David Gregorio)

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