By Yereth Rosen
ANCHORAGE, Alaska Feb 27 Royal Dutch Shell Plc
will not drill for oil in Alaska's Arctic seas this
year, the company said on Wednesday, in a widely expected
decision that follows a series of high-profile setbacks in 2012.
Both critics and supporters of Shell's controversial Arctic
offshore foray welcomed its decision to give up on drilling
there for 2013, while the company tries to get its drillships
ready and answers to U.S. federal investigators.
Michael LeVine, senior Pacific counsel for environmental
group Oceana in Juneau, Alaska, said Shell and the government
agencies regulating the company faced a "crisis of confidence."
"The decisions to allow Shell to operate in the Arctic Ocean
clearly were premature," LeVine said in a statement. "The
company is not prepared and has absolutely no one but itself to
blame for its failures."
Few observers doubted that a postponement of Shell's
drilling in the Chukchi and Beaufort Seas was coming after the
company said earlier this month its two Arctic offshore rigs
would head to Asia for repairs and upgrades.
But ConocoPhillips reaffirmed on Wednesday that it
will continue with its own plans to drill one or two exploration
wells in the Chukchi Sea in 2014, and expected to submit more
information on it to the federal regulator by the end of March.
Analysts say the Arctic's allure for oil drillers remains
strong given the complications of politics and violence they
face in other parts of the world.
Shell has spent more than $4.5 billion searching for oil in
Alaska's Arctic seas since it won licences to drill in 2005. Yet
its season last year was delayed by problems with equipment, and
2012 then ended dramatically with the grounding of the Kulluk
drillship in a storm, while it was towed south for the winter.
"Our decision to pause in 2013 will give us time to ensure
the readiness of all our equipment and people," said Marvin
Odum, director of Shell Upstream Americas.
David Yarnold, of environmental group Audubon, said Shell
had "come to its senses," since drilling amid ice floes near the
nurseries of threatened wildlife was not "smart or safe."
PAUSE, FOR NOW
The Anglo-Dutch company's move into Alaska's Arctic waters -
the first since the Macondo disaster of 2010 - was expected to
face criticism, but technical problems with its rigs led to even
Senator Lisa Murkowski, an Alaska Republican, said in a
statement she was a strong supporter of Shell's activities off
her state's northern coast if it was done to the "highest safety
"This pause - and it is only a pause in a multiyear drilling
program that will ultimately provide great benefits both to the
state of Alaska and the nation as a whole - is necessary for
Shell to repair its ships and make the necessary updates to its
exploration plans," she said.
Alaska Governor Sean Parnell said in a statement: "While
Shell's decision to pause drilling in Alaska is a
disappointment, I commend the company's commitment to safety and
"Much progress has been made toward developing the vast
resources in Alaska's Outer Continental Shelf, and we recognize
this is a long-term endeavor," the Republican governor added.
"Taking the long view, we are at the early stage of a new era of
oil exploration in the Arctic, one that will continue for
decades in a measured and responsible way."
Even before the Kulluk ran aground on Dec. 31 after escaping
its tow lines, Shell's 2012 drilling program was stalled by
troubles with support vessels and regulatory scrutiny of the
other rig, the Noble Discoverer, owned by Noble Corp.
After the Arctic drilling season closed at the end of
October, a fire then broke out on the Discoverer. There were
also engine failures on the Aiviq, the specially designed ship
pulling the Kulluk, before it lost its tow connection.
A U.S. congressman has put public pressure on Shell over the
Discoverer safety violations as the Justice Department
investigates them along with the Coast Guard.
"Shell's managers have not been straight with the American
public, and possibly even with its own investors, on how
difficult its Arctic Ocean operations have been this past year,"
said Lois Epstein, Arctic program director for The Wilderness
Curtis Smith, Shell's Alaska spokesman, said the company
would continue to do non-drilling work in the state in 2013,
including data collection and possibly site-preparation and
"We haven't put a scope of work together yet," he said.
About 1,500 seasonal jobs would not materialize this year,
though there would be no layoffs within the company.
The Kulluk, meanwhile, finally departed on Tuesday from the
Kodiak Island bay where it spent the past seven weeks. It is on
its way to the Aleutian port town of Unalaska, a trip that will
take about 10 days. It will remain there for a few days while
preparations are made to dry-tow it to Asia, Smith said.
It would then take two to three weeks to get to Asia, where
Shell is still searching for a shipyard, he added.