Shell wins approval for limited Beaufort drilling

Fri Sep 21, 2012 3:24am IST

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* Permit set restrictions, only prep work this year

* US "has set the bar high" for Arctic exploration

* Shell sets early drilling for after Eskimo whale hunt

By Yereth Rosen

ANCHORAGE, Alaska, Sept 20 (Reuters) - Royal Dutch Shell Plc on Thursday won approval for limited drilling in the Beaufort Sea off northern Alaska, allowing the British oil company to start one exploration well there while it pursues a separate prospect in the Chukchi Sea.

The U.S. Department of Interior's Bureau of Safety and Environmental Enforcement granted Shell a permit to drill to shallow depths at the Beaufort well, which follows approval three weeks ago for similar preliminary drilling in the Chukchi.

Environmentalists criticized the decision, even though the Beaufort permit will not allow Shell to penetrate any oil- or gas-bearing zones. The restrictions are similar to those imposed in the Chukchi, where Shell was granted approval to drill down to only about 1,400 feet because it was unable to bring required oil-spill equipment to the site, the agency said.

The government "has set the bar high for exploration activities in the Arctic, and any approved operations must meet those standards," Jim Watson, the agency's director, said in a statement.

Shell spokesman Curtis Smith called the Beaufort approval a "major milestone" that clears the way for drilling to start within days. Once the local Inupiat Eskimo whale hunt is over, Shell will anchor its Kulluk drill rig in the Beaufort.

Shell is poised to resume shallow drilling in the Chukchi after a large ice floe moved out of the area, Smith said. It was able to drill for only one day before the ice drifted in, and plans to re-anchor the Noble Discoverer rig at its Burger prospect later on Thursday and restart drilling shortly after.

All this 'top-hole' preparatory work would account for about half the time it takes to drill a well. "Drilling we complete this year will position us nicely for 2013," Smith said.

But environmentalists said Shell's setbacks this year demonstrate the pitfalls of offshore Arctic oil development.

"Letting Shell do top-hole drilling and other preparatory activities when they are clearly not ready to respond to an oil spill is like telling a drunk driver that as long as he stays off the freeway everything should be OK," said Rebecca Noblin, Alaska director of the Center for Biological Diversity.

Shell has spent an estimated $4.5 billion in recent years on its plans to explore in Alaska's offshore frontier. It had targeted three wells in the Chukchi and two in the Beaufort this season, and a similar number next year. But those plans were scuttled with its failure to win certification of the required oil-spill barge and navigational hazards from sea ice.

The oil-spill barge, the Arctic Challenger, has yet to be certified for seaworthiness, and some of its important oil-containment equipment was damaged during recent sea trials in the Puget Sound area. Shell announced on Monday that it would postpone efforts to drill into oil so it can repair the equipment and prepare for next year.

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