Shell has ‘every intention’ of pushing into Arctic waters despite setbacks

A top Royal Dutch Shell executive says the oil giant is undaunted in its long push to strike oil in Arctic seas despite problems that forced the company to scrap most of its planned exploration this year.

Damage to a crucial piece of spill-containment equipment forced Shell to announce Monday that it won’t be able to drill into oil-bearing subsea regions off Alaska’s coast this summer.

It’s the latest of several setbacks that have bedeviled the politically controversial exploration project, and prompted environmental groups to renew calls for the Obama administration to block the drilling.

But Marvin Odum, the head of Shell’s U.S. operations, tells The Houston Chronicle that the company has “every intention” of continuing the project next year.

“I’m not going to hide my disappointment that we’re not going to drill into hydrocarbons this year [but] the important part here is to optimize this from a multiyear standpoint,” he told the paper.

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The company has spent billions of dollars to obtain and seek to develop leases in the Beaufort and Chukchi seas off Alaska’s northern coast.

The company is planning to proceed this year with “top holes” — which involves shallower drilling above the hydrocarbon zones — to begin creating wells, and briefly started that drilling in the Chukchi Sea earlier this month but was forced to pull back due to sea ice.

Shell hopes to resume the top-hole drilling soon.

“We’ve shifted to a mode that says let’s now drill top holes [and] drill as many of those as we can through the remainder of this season and then return with an approved containment system and go forth in 2013 to drill into hydrocarbons,” Odum said.

The company had hoped to proceed much further with the oil exploration effort this year but has faced a series of setbacks, including trouble winning Coast Guard sign-off for its spill-containment system.

The latest problem occurred when the containment dome aboard the Arctic Challenger barge was damaged during tests off the coast of Washington state over the weekend. 

Other equipment has faced problems. In July, the Noble Discoverer drillship slipped its moorings and dragged anchor, almost running aground in Dutch Harbor in the Aleutian Islands.

The company has already spent around $5 billion on the Arctic effort, according to published reports, but Odum told the Chronicle that the estimates of huge oil pockets beneath the Arctic waters justify the difficult project.

“When we look at the entirety of what’s possible in the Alaska Arctic, those resources warrant the kind of attention that we’re giving it, and that is what allows this investment,” he said.

“If you look at the total portfolio of everything that Shell has the opportunity to invest in, this still makes sense to pursue this program because the resources could be that significant,” Odum said.

But environmentalists have seized on Shell’s latest problem to argue that the harsh Arctic seas, which are home to endangered and fragile wildlife, should be off limits to oil drilling.

“If you can’t even test your safety systems in calm waters without damaging them, you’ve got no business drilling for oil in the Arctic,” said Niel Lawrence, a senior attorney with the Natural Resources Defense Council.