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Shell's Alaska Offshore Drilling Gains Momentum

A U.S. unit of Royal Dutch Shell plc last week moved another step closer to lowering a drillbit into the frigid waters offshore Alaska this summer after the Department of Interior approved a stringent oil spill response plan.

Interior's Bureau of Safety and Environmental Enforcement (BSEE) subjected the plan to additional scrutiny because of stepped up safety and environmental standards that were put in place following the April 2010 Macondo well blowout in the deepwater Gulf of Mexico.

"We have conducted an exhaustive review of Shell's response plan for the Beaufort Sea," BSEE Director James Watson said. "Our focus moving forward will be to hold Shell accountable and to follow-up with exercises, reviews and inspections to ensure that all personnel and equipment are positioned and ready."

During a news conference last Wednesday Interior Secretary Ken Salazar said he had "personally" reviewed Shell's oil spill response plans (see related story). "I believe that these plans are in good shape" but it "does not mean Shell will move forward this next summer." Approval of the oil spill response plan is a "critical milestone," but Salazar noted that Shell still needed to obtain some drilling permits before it could begin operations in the Beaufort Sea.

A Shell spokeswoman also called Interior's approval of the oil spill response plan a "major milestone" in the company's efforts to drill in the Beaufort Sea's frigid Arctic waters. Shell plans to begin drilling in July if the final permits are obtained, said spokeswoman Kelly op de Weegh. A final permit to drill is required to be approved by Interior, and Shell needs a final air permit from the Environmental Protection Agency's (EPA) appeals board for the drillship Kuluk (see NGI, Jan. 16).

Interior earlier this year approved Shell's oil spill response plans to drill up to six exploration wells offshore Alaska in the Chukchi Sea; the company also has air permit approvals for a Chukchi Sea drillship (see NGI, March 5).

Shell's proposed plan to drill in the Beaufort Sea is relatively close to shore -- about 16-23 miles off the northern Alaska coast in water depths of 110-125 feet. However, the nearest Coast Guard base is about 1,000 miles away. In its oil spill response plan Shell said it would have emergency equipment on hand that included a system to trap and siphon crude from a blown-out subsea well. Similar containment systems have been developed for the warmer Gulf of Mexico waters since the Macondo tragedy. Shell plans to have two drillships stationed in the Beaufort/Chukchi region to ensure one would be ready to drill a relief well if necessary.

The government's approval of the oil spill response plans "further reinforces that Shell's approach to Arctic exploration is aligned with the high standards the Department of Interior expects from an offshore leader and adds to our confidence that drilling will finally commence in the shallow waters off Alaska this summer," op de Weegh said.

Sen. Lisa Murkowski (R-AK), ranking member of the chamber's Energy and Natural Resources Committee, congratulated the Obama administration for approving Shell's plan. Interior's approval, she said, "marks one of the last major hurdles that Shell must overcome to explore for oil in Alaska's northern waters this summer. This is good news for Alaska and the nation, which needs the energy, jobs and economic activity [that] responsible exploration and, ultimately, production will bring. This is the type of decision that will improve America's long-term energy security."

Interior's approval of the Beaufort and Chukchi plans "shows that Shell has put together a robust and comprehensive strategy to safeguard the Arctic environment," said Murkowski. She noted that federal officials estimate that the Arctic waters of Alaska's northern coast hold about 132 Tcf of natural gas and 27 billion bbl of oil.

Randall Luthi, president of the National Ocean Industries Association, also applauded the approval. "We congratulate Shell on their diligent work to meet the stringent regulatory compliance requirements of BSEE," Luthi said. The approval was "particularly encouraging" following the BSEE's approval of Shell's Chukchi Sea oil spill response plans. "While several more approvals are still needed, we are hopeful that the coming weeks will produce further encouraging news leading to the realization of the exploratory shallow-water drilling proposed by Shell in the Beaufort and Chukchi seas."

Last week Shell took delivery of the Aiviq, a 360-foot ice class anchor handler built by Edison Chouest Offshore in Larose, LA. The ship was specifically built to support Shell's shallow-water drilling program for the Beaufort and Chukchi seas, and the Aiviq is said to be one of the most technically advanced polar-class vessels in the world -- and the first of its kind to be built in the United States. Aiviq is capable of breaking ice 1 meter thick at a speed of 5 knots.

"This vessel is truly a monument to manpower and a symbol of how Shell is approaching the Arctic," said Shell Alaska Vice President Pete Slaiby. "The Aiviq is another example of our commitment to setting the bar in the Alaska offshore and employing thousands of workers along the way."

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