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BP oil disaster will probably penalize development of Shell's Arctic project

The oil drilling disaster at a BP well in the Gulf of Mexico has cast doubt on Royal Dutch Shell's plans to drill for oil thousands of miles away in the Arctic Ocean.


The oil drilling disaster at a BP well in the Gulf of Mexico has cast doubt on Royal Dutch Shell's plans to drill for oil thousands of miles away in the Arctic Ocean. US 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 US Minerals Management Service, which months ago gave preliminary approval to Shell's Alaska drilling plans, now wants the company to take more safety steps in response to the explosion at Transocean's Deepwater Horizon rig that BP hired. Shell has until Tuesday to respond to a letter sent 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. 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. ``We don't believe that they have the capacity to respond to a blowout the magnitude of that in the Gulf,'' said Marilyn Heiman, US Arctic program director for the Pew Environmental Group. She noted that at the Inupiat Eskimo village of Wainwright, one of Shell's proposed designated spill-response centers, ``there's a boat ramp, not even a boat dock.''


Stan Senner, director of conservation science for the Ocean Conservancy, said the Gulf spill demonstrates the need for a ``time-out'' to reevaluate offshore Arctic drilling. The Centre for Biological Diversity sent notice last week that it is preparing a lawsuit against the Interior Department seeking to block Shell's Beaufort and Chukchi drilling, citing alleged oil-spill risks to polar bears, a threatened species. ConocoPhillips has plans to drilling in the Chukchi as early as 2012. Norway's StatOil, which entered a partnership with ConocoPhillips, also holds leases, as do Italy's ENI and Spain's Repsol. 

Source : Reuters

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