Shell Halts Arctic Drilling for 2012

Monday, September 17, 2012

Oil and gas company Royal Dutch Shell PLC said Monday it has suspended plans to drill in the Arctic region during 2012 after damage to safety equipment.

The delay comes a week after Shell's nascent drilling program in the Chukchi Sea off Alaska was temporarily halted as a precaution against shifting sea ice.

In a statement Shell said damage to its Arctic Containment System means it will forego drilling into hydrocarbon zones this year. The containment system is crucial to the company getting final approval for drilling deep into oil- and gas-bearing zones. So far Shell only has permission to drill the well's initial stages, known as "top holes." Shell said it would concentrate on drilling as many of these as possible before the winter ice takes hold, which could be as early as Sept. 24. It also said exploratory drilling in the Beaufort Sea, which should remain ice-free for about a month longer, will begin in the coming days.

Shell has spent about $4.5 billion in its quest to drill the first wells in Arctic waters in 20 years, a project it says is "critically important" to the economy and jobs in Alaska. Its activities there are under scrutiny from U.S. regulators and environmental pressure groups.

BP PLC shelved drilling plans for the Beaufort Sea after deciding it couldn't meet the strict standards it pledged to follow in the wake on the 2010 Deepwater Horizon spill in the U.S. Gulf of Mexico. In the Russian Arctic, the giant Shtokman natural-gas exploration project has been delayed indefinitely amid doubts over its economic viability.