Oil & Gas Update: Shell Delays Alaskan Oil Drilling After Equipment Failure

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(Photo: Stock.xchng)
(Photo: Stock.xchng)

BUSINESS

  • Shell containment dome used to stop oil spills damaged; stops drilling projects for rest of 2012
  • Shell planned to invest $1 billion in arctic drilling this year
  • Arctic region contains oil worth $10 billion

Leading world oil company Royal Dutch Shell Plc was forced to stop Alaskan arctic drilling one day after it started when a containment dome, used as a cap in the event of an oil spill, was damaged.

The timeframe needed for repairs means Shell will not deep drill this year. In a company statement, Shell said: “To lay a strong foundation for operations in 2013, we will forgo drilling into hydrocarbon zones this year."

Instead of drilling into oil containing rocks, Shell will instead drill top holes, or the top part of wells, in preparation for next season.

Drilling season in the arctic lasts only a few months before the seaway becomes impassible. The broken oil drill was located in the Chukchi Sea, and there are also plans to start exploratory drilling in the Beaufort Sea.

Shell will request the US Interior Department extend the drilling season, which ends September 24.

Over the course of four years, Shell has invested $4.5 billion in equipment, offshore leases and fighting lawsuits. This year Shell had planned to invest $1 billion in arctic drilling.

It is estimated the arctic region contains approximately 1.8 billion barrels of oil worth $10 billion.

Other Setbacks

Meanwhile, drilling 70 miles northwest of Alaska has been temporarily stopped by a flowing iceberg measuring 30 miles by 12 miles. The work began September 10.

Environmentalist groups are concerned what damage a potential oil spill in the arctic could do the region’s wildlife, and environmental activist group Greenpeace has called for Shell to stop all drilling in the arctic.

Peter Slaiby, vice-president of Shell Alaska, told The Guardian he was not concerned this incident would damage the company’s reputation. The geology of the Chukchi Sea is much simpler than that of the Gulf of Mexico, Slaiby said.

Shell had originally planned to start exploratory drilling in July and had modified the arctic Challenger barge to help collect oil in the event of a well leak. Also in July, the drillship Noble Discoverer needed to be inspected by the US Coast Guard when it slipped its moorings and began drifting toward the Aleutian Islands.

Key Statistics - Oil & Gas Industry in the US (source: MarketLine)

  • In 2011, the oil and gas market in the US had revenue totaling $690.5 billion. Between 2007 and 2011, this represents a compound annual rate of change (CARC) of -0.8%.
  • Between 2007-2011, oil & cas industry production volume increased at a CAGR of 0.1%. In 2011, it reached a total of 11,943.3 million BOE.
  • For the five-year period 2011-2016, the performance of the oil & gas industry is predicted to accelerate, with a CAGR of 4.7% forecast. By the end of 2016, the market is expected to have a value of $868 billion.

By Melina Druga for
Melina Druga is an American writer and editor. She is the author of Enterprising Women: Practical Advice for First Time Entrepreneurs.

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