Shell Gives Up Drilling For Arctic Oil This Year

Shell has announced it's giving up on its hope of drilling for oil in the Arctic this year because of problems with its oil containment barge. It's the latest in a series of setbacks to Shell's multibillion dollar gamble to make drilling in the Arctic profitable and environmentally safe. It's still hoping to try again next year.

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Royal Dutch Shell has decided not to try to strike oil in the Arctic Ocean, at least not this fall. The company has been hampered by equipment problems and bad weather. It's yet another setback for Shell's ambitious and controversial plans to tap what may be a huge undersea oil reserve. NPR's Richard Harris has that story.

RICHARD HARRIS, BYLINE: Shell has spent $4.5 billion and six years preparing to drill into the seafloor north of Alaska. Last year, drilling got called off because Shell's drilling vessels didn't meet federal air quality standards. Michael Conathan at the Center for American Progress says this year, Shell was delayed because a massive oil spill response vessel needed extensive upgrades.

MICHAEL CONATHAN: With their drilling ship itself, they had some issues. They slipped an anchor in the harbor up in Alaska, and the ship nearly ran aground.

HARRIS: And the drilling efforts have been beleaguered by floating ice. Last week, a 30-mile-long chunk of ice forced Shell to move a rig out of the way, just one day after it started drilling. Now, Shell says it's having trouble with a key piece of equipment to be used in case there's a blowout. So early this morning, Shell announced that it would revamp its plans for what remains of this season. Pete Slaiby is vice president for Shell in Alaska.

PETER SLAIBY: We're going to limit the drilling to what we would call top holes. That's the first 1,400 feet of the wells we're planning over the summer. So we will - we are drilling, and we will continue to drill through the month of October.

HARRIS: Those holes will end far short of the expected oil pockets, but Slaiby says it should only take a week or two to complete each of those wells when they return next year, presuming they have all their permits to drill into oil-bearing rock.

SLAIBY: This is setting us up for success in 2013.

HARRIS: All this goes to show how much patience is required to work in the harsh and remote Arctic, where among other things, operations are at the mercy of ice, which melts in the summer but returns in the fall.

TAD PATZEK: It's all very complicated, very expensive. And it's getting late. It's mid-September.

HARRIS: Tad Patzek is a former Shell engineer who is now a professor at The University of Texas at Austin. He says this investment in time and money represents a huge bet for Shell. Patzek says the company needs to tap into a reservoir holding billions of barrels of oil to make it pay off. Shell will need to spend billions more on pipelines and other infrastructure to get that oil to shore and then on to market.

PATZEK: All of these costs are gigantic, and the complexity of the operation is unparalleled in human history.

HARRIS: It really is a pioneering effort. It's all been reviewed and mostly approved by the federal government. But this step into new territory makes environmental activists worried. Conathan, at the Center for American Progress, says remember the Deepwater Horizon blowout in the Gulf of Mexico. There, thousands of boats and tens of thousands of people were on hand to respond rapidly. That scale of a response is simply impossible in far northern Alaska.

CONATHAN: There's no highway system. There's no rail system. The airports are very limited, and there's no deepwater port facility, and there's no Coast Guard facility in the region.

HARRIS: Conathan argues that Shell should wait until all that's in place before drilling into one of the last pristine ecosystems on Earth. But expanding oil exploration is politically popular in the United States, and Shell certainly wants to move forward so it can find out whether all this effort will pay off. Slaiby hopes to find out next summer, when the company's drill rigs may finally punch into undersea oil fields. Richard Harris, NPR News.

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