December 6, 2024

Shell Told to Better Manage Arctic Drilling

Shell has already announced that it will not return to the Arctic Ocean in 2013, saying it would take a “pause” to repair its damaged equipment and review its drilling and safety systems.

Interior Secretary Ken Salazar said that would not be enough. He said the company must demonstrate to the government and an independent reviewer that it has the equipment, the management capacity and a plan for all contingencies before it can resume operations.

“Shell screwed up in 2012 and we’re not going to let them screw up whenever their pause is removed unless they have these systems in place,” Mr. Salazar said in a news briefing Thursday.

The Interior Department conducted an urgent review of Shell’s operations after a disastrous 2012 drilling season notable for ship groundings, environmental and safety violations, the failure of a spill-containment system, weather delays and other mishaps.

The review, completed last week, concluded that Shell had failed in a wide range of basic operational tasks, like supervision of contractors that performed critical work, including towing one of the company’s two drilling rigs. That rig, the Kulluk, ran aground on Sitkalidak Island in Alaska on New Year’s Eve and is now headed to Asia for extensive repairs. No oil was spilled and there were no serious injuries.

The report was harshly critical of Shell management, which has acknowledged that it was unprepared for the problems it encountered operating in the unforgiving Arctic environment. The report did not single out individual managers.

The 32-page study also faulted government agencies, including the Interior Department and the Coast Guard, for failing to anticipate some of the problems Shell faced, including accidents involving both drilling rigs as they traveled to and from drill sites in the Beaufort and Chukchi Seas.

“Government still has a lot to learn,” said Mr. Salazar, who will soon step down and is expected to be replaced by President Obama’s nominee, Sally Jewell, chief executive of Recreational Equipment Inc. in Seattle. “The Arctic is a very difficult environment to operate in. Shell is one of the most resource-capable companies in the world and it still encountered a whole host of problems trying to operate up there.”

“It doesn’t mean that exploration cannot continue,” Mr. Salazar said. “But I think the cardinal lesson is that moving forward on any Arctic exploration needs the comprehensive integration we attempted to bring to last summer and will attempt to do an even better job of in the future.”

A Shell spokesman, Curtis Smith, said the company took the Interior Department’s recommendations seriously.

“Consistent with our recent decision to pause our 2013 drilling program, we will use this time to apply lessons learned from this review, the ongoing Coast Guard investigation and our own assessment of opportunities to further improve Shell’s exploration program offshore Alaska,” Mr. Smith said in a statement. “Alaska remains a high potential area over the long term, and we remain committed to drilling there safely, again.”

Shell lobbied federal officials for several years to persuade them it could drill safely in the Arctic. The company has invested more than $4.5 billion in leases and equipment on the venture, which Shell believes can yield billions of barrels of oil over the next two decades. Tommy Beaudreau, director of the Interior Department’s Bureau of Ocean Energy Management and the leader of the review team, said that Shell conducted some operations well but failed in its oversight of critical contractors.

“Shell simply did not maintain strong, direct oversight of some of its key contractors,” Mr. Beaudreau said in a statement. “Working in the Arctic requires thorough advance planning and preparation, rigorous management focus, a close watch over contractors, and reliance on experienced, specialized operators who are familiar with the uniquely challenging conditions of the Alaskan offshore.”

A number of investigations into the 2010 BP Deepwater Horizon explosion and oil spill in the Gulf of Mexico identified poor oversight of contractors as a central contributing factor to the accident. A trial now under way in federal court in New Orleans will help determine the relative fault of the well operator and its subcontractors.

Marilyn Heiman, director of the United States Arctic Program for the Pew Charitable Trusts, said in an e-mail that the Interior Department review was an important first step toward understanding what went wrong and how to prevent future accidents.

“Improved oversight and rigorous world-leading standards must be put in place before any future Arctic drilling is allowed,” she said. “The violations and mishaps from last year are not acceptable only three short years after the Deepwater Horizon disaster.”

Article source: http://www.nytimes.com/2013/03/15/business/global/interior-dept-warns-shell-on-arctic-drilling.html?partner=rss&emc=rss

Shell Suspends Arctic Drilling for 2013

The company’s two drill ships suffered serious accidents as they were leaving drilling sites in the Beaufort and Chukchi Seas last fall and winter and are being sent to Asia for repairs. Shell acknowledged in a statement that the ships would not be fixed in time to drill during the short summer window this year.

“Our decision to pause in 2013 will give us time to ensure the readiness of all our equipment and people,” said Marvin E. Odum, president of Shell Oil Company.

He said Arctic offshore drilling was a long-term project that the company would continue to pursue.

The Interior Department, the Coast Guard and the Justice Department are reviewing Shell’s operations, which have included groundings, environmental and safety violations, weather delays, the collapse of its spill-containment equipment and other failures.

The setbacks come after Shell has invested more than $4.5 billion in leases and equipment and spent several years on an intensive lobbying campaign to persuade federal officials that it could drill safely in the unforgiving waters of the Arctic Ocean. Shell now acknowledges that the venture has been much more difficult than it anticipated.

Shell had planned to drill as many as 10 wells in 2012 but was able to start only two. Federal regulators barred the company from drilling into oil-bearing formations because it did not have adequate spill prevention and cleanup equipment available.

“This is not a surprise, as Shell has had numerous serious problems in getting to and from the Arctic, as well as problems operating in the Arctic,” said Lois N. Epstein, Arctic program director for the Wilderness Society and a member of the Interior Department panel reviewing Shell’s operations. “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.”

Both ships involved in the drilling, the Noble Discoverer and the Kulluk, suffered serious accidents while moving to or from the oil fields. In addition, Coast Guard inspectors found numerous violations on the Discoverer and have referred the matter to federal prosecutors for investigation.

Shell executives said the Kulluk had sustained damage to its hull when it was grounded in a fierce storm on tiny Sitkalidak Island in late December. Seawater also caused electrical damage.

They said the propulsion systems on the Noble Discoverer required maintenance and might need to be replaced for the ship to be seaworthy and pass Coast Guard inspections.

The Noble Discoverer dragged its anchor last July and nearly ran aground on the Alaska coast, and four months later it was damaged by an explosion and fire while in port in the Aleutian Islands.

Senator Lisa Murkowski, Republican of Alaska, a strong proponent of Arctic oil exploration, said the delay would ensure that drilling could proceed safely in the future.

“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 that will ensure a safe return to exploration soon,” Ms. Murkowski said in a statement.

Michael LeVine, senior Pacific counsel for the environmental advocacy group Oceana, said that Shell and the federal authorities who permitted it to begin drilling needed to think carefully about whether it would ever be safe to resume.

“The decisions to allow Shell to operate in the Arctic Ocean clearly were premature,” Mr. LeVine wrote in an e-mail. “The company is not prepared and has absolutely no one but itself to blame for its failures.”

Article source: http://www.nytimes.com/2013/02/28/business/energy-environment/shell-suspends-arctic-drilling-for-2013.html?partner=rss&emc=rss