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Take more care Interior review of Shell’s Arctic performance faults contractor oversight Alan Bailey Petroleum News
On March 14 the U.S. Department of the Interior released the report from its 60-day review of Shell’s 2012 Arctic operations. The review, triggered by a series of mishaps culminating in the grounding in the Gulf of Alaska of Shell’s Arctic floating drilling platform, laid much of the blame for Shell’s problems on failings in the company’s management oversight of its key contractors.
“This was an area where Shell, frankly, fell short, contributing in large part to many of the problems Shell experienced last year, including its inability to deploy a functioning containment system, violation of the emission requirements set forth in its air permits and problems with both of its drilling rigs, including the Kulluk, which grounded off Kodiak Island during a tow operation in the Gulf of Alaska,” said Tommy Beaudreau, principal deputy assistant secretary for land and minerals management, the leader of Interior’s review team.
The review found that all phases of an Arctic exploration program must be integrated and subject to strong management and government oversight, Beaudreau said.
Comprehensive plan Recommendations from the review include a need for Shell to submit to Interior a “comprehensive integrated plan” before resuming its Arctic exploration program. That plan, going into much more detail than a regular exploration plan, must describe every phase of Shell’s operations through to end-of-season demobilization, including topics such as a detailed description of all preparation activities; timelines around those preparations; the contractors the company is working with; the schedule for deployment; the targets and schedule for in-theatre operations; and demobilization plans, Beaudreau said.
“We’re asking them to go another step and to provide us with a great deal of detail around their entire operation in an integrated way, including not only drilling operations but their maritime operations as well,” he said.
The review also recommends that Shell complete a third-party management system audit to confirm, among other things, that the company’s management systems, including its oversight of its key contractors, are appropriate for Arctic operations, Beaudreau said.
The review report stresses the critical need for coordination between all entities involved in some way in Arctic exploration, including the federal government, state government, local communities and companies operating in the region. In this regard, the report notes Shell’s success in working with Alaska Native communities that rely on the ocean for subsistence use.
Lack of preparedness But the review report comments on what it characterized as Shell’s lack of preparedness for the 2012 drilling season.
“This review has confirmed that Shell entered the drilling season not fully prepared in terms of fabricating and testing certain critical systems and establishing the scope of its operational plans,” the report says. “The lack of adequate preparation put pressure on Shell’s overall operations and timelines at the end of the drilling season.”
The report comments that Shell generally performed safely when conducting activities within its core competencies in offshore drilling, with two well top-hole sections completed, no oil spills, no significant injuries and virtually no reported impacts on subsistence activities. But the company experienced some significant problems in other areas, particularly when depending on contractors for the delivery of critical items required for the drilling program or for the carrying out of certain activities, the report says.
And the report stresses the need for Arctic-specific practices for Arctic drilling, such as the need for a subsea oil containment system when drilling into oil-bearing zones and drilling season timing restrictions that would enable an open-water response in the event of an oil spill emergency.
Recommendations adopted Interior Secretary Ken Salazar said that Interior accepts the review findings and will adopt the recommendations.
“These are directives that will be issued to Shell. This is a Shell-specific report, and Shell will not be allowed to move forward into the Arctic to do any kind of exploration unless they have this integrated management plan that’s put in place, that is satisfactory to the Department of the Interior,” Salazar said. “Shell screwed up in 2012”
In a March 18 email Shell spokesman Curtis Smith told Petroleum News that Shell is committed to safely drill in the Arctic again and that the company is applying lessons learned from 2012. In February the company announced that it was deferring its planned 2013 drilling program.
“We appreciate the Department of Interior’s review of Shell’s 2012 Alaska operations and take seriously the findings and recommendations that are highlighted within,” Smith said. “We also appreciate the recognition of Shell’s successes in Alaska and the commitment we have made to setting a high bar for Arctic exploration. Consistent with our recent decision to pause our 2013 drilling program, we will use this time to apply lessons learned from this review, the ongoing Coast Guard investigation and our own assessment of opportunities to further improve Shell’s exploration program offshore Alaska.”
Varied reactions Alaska’s congressional delegation expressed their support for Shell’s Alaska program.
“There’s a history of safe drilling in Alaska’s Arctic waters going back to the 1970s,” said Sen. Lisa Murkowski. “While Shell’s exploratory drilling program maintained that record of safety, they did experience problems with transportation and in other areas that need to be addressed before Shell proceeds. However, I want to review the full report to ensure that stricter oversight is not code for prohibiting access to our resources.”
Environmental organizations have latched onto Shell’s problems as illustrating the difficulties and risks of Arctic offshore oil exploration.
“We would have liked to see the Department of the Interior commit to continued evaluation of Shell’s 2012 operational problems to ascertain if — as we believe and the evidence supports — it is unwise to proceed with Arctic Ocean drilling at this time,” said Lois Epstein, Arctic program director for The Wilderness Society. “A 60-day analysis is not enough time to truly assess and develop remedies for Shell’s very serious failures.”
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