Shell postpones plans to start Arctic drilling until next year

Environmental protesters blast firm after it abandoned efforts to start drilling before winter when test of protection systems failed to meet standard to gain permit

guardian.co.uk, Simon Bowers, Monday 17 September 2012

Sea ice in the Chukchi Sea, near where Shell wants to drill. Photograph:
Steven J Kazlowski/Alamy

Environmental protesters blasted Shell on Monday after the energy giant abandoned controversial plans to start drilling for oil in the Arctic this year when a final test of its environmental protection equipment failed to meet the standards required to gain a full drilling permit.

The oil and gas group said a new type of "containment dome" – designed for use in the event of a leaking wellhead – had been damaged during testing.

"During a final test, the containment dome aboard the Arctic Challenger barge was damaged," Shell told investors in an update on Monday morning. "It is clear that some days will be required to repair and fully assess dome readiness."

As a result Shell has been unable to secure a permit to undertake full drilling operations and will have to wait at least until after the Arctic winter to resume its efforts.

The long-planned drilling programme in the Chukchi Sea, 70 miles off Alaska's north-west coast, has been dogged with last-minute hiccups as the company has raced to get drilling under way before the winter sets in.

Some drilling started this month but was halted within days after it emerged that an ice floe 30 miles long and 12 miles wide appeared to be heading towards the drill ship. Progress was further hampered by efforts taken to protect local whaling operations.

"In order to lay a strong foundation for operations in 2013, we will forgo drilling into hydrocarbon zones this year," Shell said. It will continue to drill several preparatory "top holes" ahead of full-blown drilling operations next year.

Responding to Shell's latest Arctic setback, Ben Ayliffe, senior Arctic campaigner at Greenpeace International, said: "Shell has invested seven years of effort and spent the best part of $5bn on its Arctic programme, but we can now see what a monumentally reckless gamble this was. The company has nothing to show for it except a series of almost farcical safety mishaps that has left its reputation in tatters.

"Investors must now be asking whether investing such vast sums of money trying to exploit the fragile Arctic is really worth it."

Shell still awaits a full drilling permit for its exploration programme in the area and the paperwork is dependent on successful testing of its Arctic containment system, which includes the dome. "We look forward to the final receipt of our drilling permits for the multiyear exploration programme upon the successful testing and deployment of the Arctic containment system," the company said.

Environmental campaigners have repeatedly warned about the high risks involved in Arctic drilling as well as the potentially catastrophic consequences of a spill similar to Deepwater Horizon in a region already affected by climate change.

Asked if another major spill would destroy the company's reputation, Peter Slaiby,vice-president of Shell Alaska, recently told the Guardian: "I feel there is a hell of a responsibility on my head, but we have clear accountability models. I have the ability to do things in the right way and I have the backing of the most senior leaders in Shell to do things the right way."

Slaiby had also rounded on critics, such as Greenpeace, which had raised concerns about the amount of field testing undertaken using the containment dome, also known as a "capping stack".

"We even had the director of BSEE [Bureau of Safety and Environmental Enforcement] out with me looking at the capping stack … I find these charges [of insufficient planning] groundless."

Earlier this month, the containment dome had become the focus of debate after documents obtained under a Freedom of Information Act request suggested field testing of a containment dome took place over just two hours on 25-26 June.

Public Employees for Environmental Responsibility (Peer), a US watchdog that helps federal and state employees raise concerns over environmental issues, said it was shocked by the single page of notes from the BSEE after it filed a federal lawsuit against the agency asking for all documents relating to the capping tests.

"The first test merely showed that Shell could dangle its cap in 200ft of water without dropping it," said Kathryn Douglass, a Peer lawyer. "The second test showed the capping system could hold up under laboratory conditions for up to 15 minutes without crumbling. Neither result should give the American public much comfort."

In its statement on Monday morning, Shell – which has spent more than $4.5bn (£2.77bn) over four years preparing for work in the Chukchi and Beaufort seas – pointedly reminded investors of the importance of its Arctic drilling programme to the US economy.

"This exploration programme remains critically important to America's energy needs, to the economy and jobs in Alaska, and to Shell," it said.

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Shell criticised for limited testing of Alaska drilling containment equipment