Interior chief: Shell ‘screwed up,’ must improve to resume Arctic effort

Royal Dutch Shell “screwed up” in 2012 during its troubled efforts to begin oil exploration off Alaska’s coast, and must improve planning and contractor oversight before regulators will let it return, Interior Secretary Ken Salazar said.

Interior on Thursday released the findings of its 60-day review of the oil giant’s mishap-filled effort to begin looking for oil in Arctic waters off Alaska’s coast last year.

“Shell screwed up in 2012 and we are not going to let them screw up” when they seek to resume their effort, Salazar told reporters on a conference call.

“This review has confirmed that Shell entered the drilling season not fully prepared in terms of fabricating and testing certain critical systems and establishing the scope of its operational plans,” the review states.

Interior said it would require Shell to develop a “comprehensive and integrated” operational plan and complete a third-party audit of its management systems, which are two of the various recommendations in the report.

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Shell has already announced that it will “pause” and not seek to drill in the Arctic seas off Alaska in 2013, but eventually hopes to resume operations in the oil-rich region.

“Shell should take this time to learn the lessons from last year and follow the recommendations that we have set forward in this report,” Salazar said.

The company began operations off Alaska’s coast last year but faced several woes, including damage during testing to a key piece of equipment that would be needed to contain a potential subsea blowout.

Ultimately, Shell did not win Interior Department permission to drill into oil-bearing zones, but was allowed to begin preliminary, so-called top-hole drilling last year.

In another problem, Shell’s Kulluk drilling rig ran aground en route back from the Arctic region. The Kulluk and a second rig, the Noble Discoverer, will be towed to Asia for maintenance and repairs, the company said.

Interior’s review notes that Shell’s plans went awry when it came to working with contractors in achieving tasks outside of drilling itself.

“A recurring theme from Shell’s 2012 experience is that there were significant problems with contractors on which Shell relied for critical aspects of its program – including development of the [Arctic Containment System], the air emission mitigation technology applied to the rigs’ engines, the condition of the Noble Discoverer, and the Kulluk towing operation,” the report states.

The report also looks at federal oversight, noting for instance the need to continue developing and refining Arctic-specific standards. Check it out here.

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