On Feb. 1 while answering questions during a media webinar for Shell’s announcement of its 2012 results, Shell CEO Peter Voser said that his company is waiting for the outcome of investigations following the grounding of the Kulluk, the company’s floating drilling platform, before deciding on next steps in Alaska.
Work needs to be done on both of Shell’s Arctic drilling rigs, to make the rigs ready for the 2013 drilling season, Voser said. The Noble Discoverer, the rig that Shell is using for Chukchi Sea drilling, requires “a series of upgrades,” while the Kulluk will require repair following the New Year’s Eve grounding incident, he said.
“It is too early to say how this will impact the (the program) going forward,” Voser said, referencing the Kulluk grounding. “We need to wait for the investigations which some external bodies are doing, but we also internally assess the risks and the learnings and then actually lay out our plans for the years to come.”
The Kulluk ran aground to the south of Kodiak Island on the evening of Dec. 31 and was refloated on Jan.6, before being towed to a safe anchorage on the following day.
Shell Chief Financial Officer Simon Henry said that Shell had provided for $40 million in Kulluk salvage costs in the last quarter of 2012. The company anticipates another $50 million in Kulluk related costs in early 2013, including costs incurred by the U.S. Coast Guard and the costs of using Shell’s contracted vessels. But none of these costs include the eventual bill for repairing the Kulluk — that cost is not yet known, Henry said.
So far Shell has spent about $5 billion on its Alaska program, including a spend of about $1 billion in 2012, Voser said.
Voser vehemently denied a story that has been doing the rounds, that Shell moved the Kulluk south to avoid taxes in Alaska.
“This played no factor in the decision to move the Kulluk,” he said. “We had to move the Kulluk to a safe, bigger harbor to do the repairs.”
The tax avoidance story had resulted from a statement by a Shell employee being taken out of context, Voser said.
Alaska challengesAsked whether the grounding of the Kulluk in a severe storm demonstrated the type of challenge that operating in the Alaska offshore presents, Voser said that while harsh weather is a factor in Alaska, it is also a factor in many other parts of the world.
“We are actually used to dealing with that,” Voser said, citing a recent situation in Australia where the company had been forced to mobilize and demobilize a rig crew three times because of typhoons.
All businesses have to manage risks, he said.
“I can never say that there will never be an incident,” Voser said. “That’s just not going to work.”
Asked whether Shell might leave Alaska in the fallout from the grounding of the Kulluk and the ensuing investigations into the company’s Alaska operations, Voser said that responsible operators like Shell, who are prepared to spend significant sums of money to prepare for drilling, are needed for development in the Arctic, a region with huge undiscovered resources.
“This is an area where we see the Shell strengths actually playing and, therefore, in the longer term we want to develop in the Arctic,” Voser said.