Shell Halts Offshore Drilling in Alaska

It was just one week ago today that Royal Dutch Shell PLC (NYSE: RDS-A) (NYSE: RDS-B) began drilling a well in the Chukchi Sea off the north coast of Alaska. The company ran into a problem by the end of the first week:

[D]uring a final test, the containment dome aboard the Arctic Challenger barge was damaged. It is clear that some days will be required to repair and fully assess dome readiness.

The containment dome is part of the safety equipment designed to capture the flow of crude in the event the well should leak. A dome is now required by federal regulators as a result of the explosion of the Deepwater Horizon in April 2010 that killed 11 workers and dumped 5 million barrels of crude into the Gulf of Mexico.

Shell said the delay would prevent it from drilling any wells in the Arctic for this year. The company’s original plan had been to drill five wells this year. That had been cut to just one by early September. The company does plan to begin drilling work though:

In order to lay a strong foundation for operations in 2013, we will forgo drilling into hydrocarbon zones this year. Instead, we will begin as many wells, known as ‘top holes,’ as time remaining in this season allows. The top portion of the wells drilled in the days and weeks ahead will be safely capped and temporarily abandoned this year, in accordance with regulatory requirements.

Shell also plans to begin exploratory drilling in the Beaufort Sea at the end of the whale hunt season and “the anticipated receipt of a top hole drilling permit.”

Paul Ausick