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Shell drilling pauses in the arctic

01.03.2013 - 10:12

Royal Dutch Shell "paused" their exploratory drilling in the Arctic off the coast of Alaska on 27 February and while environmental groups like Greenpeace are lauding their campaigning efforts it is the Arctic itself that won this battle. With its harsh conditions the so-far mostly untouched pristine wilderness has  for the second time this year stopped the petroleum company's progress.

Shell completed top-hole drilling on two wells in 2012 in the Beaufort and Chukchi Seas, marking the industry’s return to offshore drilling in the Alaskan Arctic after more than a decade. This drilling was completed safely, with no serious injuries or environmental impact.

After the drilling season ended, however, one of Shell’s drilling rigs, the Kulluk, was damaged in a maritime incident related to strong weather conditions. The Kulluk and the second drilling rig, the Noble Discoverer, will be towed to locations in Asia for maintenance and repairs.

Arctic drilling has stopped in the short term but Shell say they are not worried. “We’ve made progress in Alaska, but this is a long-term programme that we are pursuing in a safe and measured way,” said Marvin Odum, Director, Upstream Americas.  “Our decision to pause in
2013 will give us time to ensure the readiness of all our equipment and people following the drilling season in 2012.”

They've spent £5 billion to secure permits for their drilling operations and have so far only managed to drill two top holes. However while other groups say that this shows how pointless drilling in the Arctic is, the longer they wait the greater the effects of climate change and the better for the drilling. Between 2003 and 2011 there was a 50% decrease in ice volume and within 10  years it is
estimated that there will be no summer ice and shipping routes will be opened up.

“Shell remains committed to building an Arctic exploration program that provides confidence to stakeholders and regulators, and meets the high standards the company applies to its operations around the world,” said Odum. However, in 2012, "in response to questions from the UK Environmental Audit Committee, Shell's head of emergency response [Peter Velez] admitted that the company had not yet costed a clean-up operation in the Arctic, leaving shareholders effectively
exposed to potentially huge financial losses"  Conservative MP Zac Goldsmith,  told a select committee.
 

A clue as to Shell's persistence is found in the US Geological Survey which estimates that 20% of the world's oil and gas reserves are in the Arctic still waiting to be discovered. The "World Energy Outlook 2012" report, however stated "in view of the technical and environmental challenges and high cost of operating in extreme weather conditions including the problems of dealing with ice floes and shipping in water that remains frozen for much of the year, we do not expect the Arctic offshore to make a large contribution to global oil supply during the Outlook period." Data in the same report suggest that projected oil demand in 2035 could be met entirely by currently
producing, already discovered fields.

The International Energy Agency reported in 2012 that 1/3 of the existing reserves only would be needed to meet the 2 degrees limits in temperature increase.

Environmental groups have tried to obstruct the drilling with legal challenges  but Shell say it was that they had "underestimated the huge challenges posed by drilling off Alaska".

Kerry McCarthy, MP for Bristol East in the UK, reports in parliament at a debate on Protecting the Arctic that what she found shocking "is the thawing of permafrost, which would cause the release of methane, a greenhouse gas that does not get the attention that carbon dioxide emissions do,
but has a warming effect 72 times more than CO2 has over 20 years".

The current Arctic situation met the Intergovernmental Panel on Climate Change's definition of "dangerous change".   The report Protecting the Arctic, Second Report of the Environmental Committee, notes evidence that climate change is "having profound impact on many species" and details some key tipping points such as the Arctic becoming ice free in summer months.

On 8 January the Obama administration launched a 60-day review into whether Shell should be permitted to drill in the Arctic. The UK government has agreed to publish a policy framework for the Arctic in the summer of 2013. Meanwhile, Shell are not the only company that are drilling in this region. Cairn Energy has been drilling off the coast of Greenland for a couple of years.