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April 03, 2014 --- Vol. 20, No. 21April 2014

Coast Guard issues Kulluk report

The U.S. Coast Guard has published its report documenting the findings from its investigation of the grounding of the Kulluk, Shell’s floating drilling platform, in the Gulf of Alaska on Dec. 31, 2012.

The report says that a series of events led to the grounding but that the most significant factor in the accident was the inadequate assessment and management of risks associated with a complex winter vessel movement in Alaska’s unique and challenging operating environment.

The safety recommendations resulting from the investigation include a recommendation that the Coast Guard commandant should partner with the Towing Safety Advisory Council to form a working group to develop a “task statement” addressing concerns relating to the Kulluk incident, including issues that the incident has raised and the towage of offshore drilling units in an Arctic marine environment.

Shell has issued a statement saying that it is reviewing the report.

“We appreciate the thorough investigation and will take any findings seriously,” wrote Shell spokeswoman Megan Baldino in a press release issued today. “Already, we have implemented lessons learned from our internal review of our 2012 operations. Those improvements will be measured against the findings in the USCG report as well as recommendations from the US Department of Interior.”

—Alan Bailey

See story in April 13 issue, available online at 11 a.m., Friday, April 11 at www.PetroleumNews.com

d North Slope state leases. This situation could leave the new player and would-be-operator with prime pieces of production and exploration acreage chopped out of a unit or exploration area

State officials say they are concerned that this will “severely weaken the ability of any new operator to effectively compete with BP” and thus dampen interest in the bidding process.

Apologizing for “raising the matter of preference rights so bluntly,” Shively warned the recipients of his letter that the state had final approval rights on all divestitures. (Copies of his letter to Leone were sent to all working interest owners in the properties marked for divestiture.)

Shively also wrote that “disapproval of lease assignments is another approach” he might use to assure that the charter between BP, ARCO and the state is “faithfully executed.”

The commissioner advised recipients to have their legal departments review a 1990 Texas court decision which involved the Federal Trade Commission’s refusal to approve a buyer who attempted to purchase assets that the FTC required to be divested through the exercise of preferential rights.

Shively invited recipients to call him to discuss his letter.

BP Amoco's December term price for Alaska North Slope crude oil is $23.61 a barrel, up $1.81 a barrel (8.3 percent) from the November term price of $21.80 a barrel. This is the highest the term price has been since February 1997, when it stood at $23.63 a barrel.

The year-to-date average term price is $16.49 a barrel, up 25.5 percent from the comparable 1998 year-to-date average of $13.14 a barrel. The term price for December 1998 was $11.45 a barrel.

BP is the largest producer of ANS crude and the only producer to post term prices.

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