UPDATE 3-Drifting Shell drilling rig grounds on rocks off Alaska

Wed Jan 2, 2013 1:19am EST

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* No spill seen so far after overflights on Tuesday

* Ran aground off Kodiak Island

By Yereth Rosen

ANCHORAGE, Alaska, Jan 1 (Reuters) - An oil drilling rig owned by Royal Dutch Shell Plc ran aground in Alaska after drifting in stormy weather, highlighting the serious risks of working in an offshore region where some in the industry see huge potential.

While the U.S. Coast Guard was concerned about a potential spill from the drillship, named the Kulluk, its hull appeared sound after a few overflights on Tuesday, officials said.

Coast Guard Captain Paul Mehler said the Kulluk had 143,000 gallons of ultra-low-sulfur diesel and 12,000 gallons of other oil products on board.

The grounding of the drillship, weighing nearly 28,000 gross tons and operated by Noble Corp, is a blow to Shell's $4.5 billion offshore program in Alaska.

The rig had been headed to Puget Sound for maintenance and upgrades when it broke away from one of its tow lines on Monday afternoon and was driven to rocks just off Kodiak Island that night. The 18-member crew had already been evacuated by the Coast Guard on Saturday because of risks from the storm.

With winds reported at up to 60 miles (100 km) an hour and Gulf of Alaska seas of up to 35 feet (11 m), responders were unable to keep the ship from grounding, the Coast Guard said.

Sean Churchfield, operations manager for Shell Alaska, could not explain why the Kulluk had been caught in the weather. "I can't give you a specific answer, but I do not believe we would want to tow it in these sorts of conditions."

The rig was upright and rocking with a slow motion but stable, and Churchfield said there was still plenty of work to bring the incident to a safe conclusion.

The leading Democrat on the U.S. House of Representatives' Natural Resources Committee, Ed Markey, of Massachusetts, said the incident and others illustrated the perils of drilling offshore in the area.

"Oil companies cannot currently drill safely in the foreboding conditions of the Arctic, and drilling expansion could prove disastrous for this sensitive environment," he said.

"TRULY CHALLENGING"

Susan Childs, emergency incident commander for Shell, believed that a significant spill was unlikely because of the Kulluk's design, with diesel fuel tanks isolated in the center of the vessel and encased in very heavy steel.

Shell is waiting for weather to moderate to begin a complete assessment of the Kulluk.

The Anglo-Dutch company's drilling plans had already alarmed environmentalists and locals, who believe the program threatens a fragile region.

"Shell and its contractors are no match for Alaska's weather and sea conditions either during drilling operations or during transit," Lois Epstein, Arctic program director for The Wilderness Society, said in an email, calling for an end to Shell's "costly drilling experiment in the Arctic Ocean."

Rick Steiner, a former University of Alaska marine biology professor and an Alaska environmental activist, said the risks of going through the Gulf of Alaska were underestimated, though companies had to move equipment that way to reach Arctic waters.

Unlike Prince William Sound, where a system with 11 powerful escort and rescue tugs was established after the 1989 Exxon Valdez disaster, the Gulf of Alaska and Aleutian Island region has no high-powered tugs, he said.

A similar accident could happen with any of the 20 large ships heading through the area every day on the cargo route between Asia and North America, he said, though he faulted Shell for failing to anchor the drillship days ago when there was notice that high winds were coming.

"Like every disaster, this is a cascade of human error and mechanical failures," Steiner said.

BEDEVILLED

The trouble began on Friday, when the ship towing the Kulluk had a mechanical failure and lost its connection. That ship, the Aiviq, was reattached early on Monday along with a tug sent by the operator of the Trans Alaska Pipeline System. But the Aiviq lost its link again on Monday afternoon, and the tug guided the Kulluk to where a grounding would have the least environmental impact.

The nearest community is Old Harbor, a Native Alutiiq village with 208 residents on the south side of Kodiak Island.

The Kulluk, which was being taken to Seattle for the off season, was used by Shell in September and October to drill a prospect in the Beaufort Sea. Built in 1983, it had been slated to be scrapped before Shell bought it in 2005. The company has spent $292 million since then to upgrade the vessel.

Shell's Arctic campaign has been bedevilled by problems. A second drillship, the Noble Discoverer, was briefly detained in December by the Coast Guard in Seward, Alaska, because of safety concerns. A mandatory oil-containment barge, the Arctic Challenger, failed for months to meet Coast Guard requirements for seaworthiness and a ship mishap resulted in damage to a critical piece of equipment intended to cap a blown well.

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