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Extreme weather blocks Shell' s attempt to recover Alaska oil rig

BY BEN LEFEBVRE

ANCHORAGE -- Unsteady seas thwarted Shell and the United States Coast Guard' s attempts to retrieve Shell' s oil rig from an Alaskan island where it has been grounded for nearly a week. Shell' s Kulluk oil rig crashed into the uninhabited Sitkalidak Island off the south Alaska coast after stormy seas pried it loose from tug boats that had been pulling it to Seattle for maintenance work. The Kulluk had been drilling exploratory wells in the Arctic waters as part of Shell' s $5 billion bid to resuscitate offshore oil production in waters that have not seen such activity for two decades.

ConocoPhillips and other oil companies interested in the possibility of drilling for the estimated 550 MMbbl of oil estimated to be under the Arctic waters are also viewing Shell' s experience as something of a test case. Now, heavy rains, high waves and brutal winds have blocked efforts to move the rig about 30 miles, to Kiliuda Bay off of Kodiak Island, site of so-called "ports of refuge" where the damage can be more fully assessed. The National Weather Service issued a gale warning for the northern Bay of Alaska, with forecasts of winds reaching 45 knots and waves cresting as high as 25 ft. It' s all dependent on the weather, Destin Singleton, spokeswoman for Shell, said about recovery efforts. The things they watch are generally wind, swells and visibility.

More than 600 people, a dozen ships and a handful of helicopters are trickling in to help remove the Kulluk. Shell said the Kulluk is in stable condition with no evidence of any of the 150,000 gallons of diesel and lubricants it carries leaking. Water entering parts of the rig has caused damage, including to its generators. Depending on how long it takes to repair or replace the Kulluk, Shell may not be able to have the necessary number of rigs ready to meet its United States permit requirements by the summer restart of Arctic drilling season. Shell paid $2 billion for leases to drill in the region, but only managed to start two exploratory wells.

The grounding has raised the hackles of politicians and environmentalists who have warned that the extreme weather found off the shore of Alaska makes equipment problems and hazardous fuel leaks more likely to occur. The region' s relatively remoteness also means that cleanup efforts take longer to coordinate. Shell' s Arctic drilling program has been beset with mishaps from the start.Lingering ice prevented the company from dispatching its two rigs to the region for months. Once in Alaska, one rig used by Shell, Nobel Discoverer, nearly ran aground in July after becoming unmoored while in port. Equipment failures on the rigs have also been a problem.

But the Kulluk accident also gives Shell a chance to show that while problems may occur, they can also be resolved without major incident, said Lysle Brinker, analyst at energy consulting firm IHS. "If they can successfully get this rig off the rocks without too much more incident, it will be a plus to show that they can deal with this sort of problem," Mr. Brinker said. "But if there' s a large leak, it' ll make things worse."

Dow Jones Newswires

01/07/2013

 

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