|
A bittersweet year for Shell in Alaska In 2012 company finally starts drilling in the Arctic OCS, while a string of glitches and the Kulluk grounding grab public attention Alan Bailey Petroleum News
For Shell, 2012 was the year in Alaska in which the company finally saw drill bits turn in its oil prospects in the Beaufort and Chukchi seas after a six-year effort to start its Arctic outer continental shelf exploration drilling program. But a series of snafus and a major grounding incident with the company’s Kulluk floating drilling platform also took the gloss off the year’s achievements, giving new ammunition to those who view oil drilling in the Arctic offshore as unacceptably risky.
At the beginning of the year there were signs that, after battling a constant headwind of litigation and permitting hurdles for several years, Shell’s ambition of starting a new program of Arctic Alaska offshore drilling was finally going to bear fruit.
Following the conclusion of an appeal against the 2008 Chukchi Sea lease sale in which Shell purchased its Chukchi Sea leases, the Bureau of Ocean Energy Management, or BOEM, had affirmed the validity of the sale in October 2011. And in December 2011 BOEM approved Shell’s Chukchi Sea exploration plan, having already approved the company’s Beaufort Sea plan in August 2011.
Following the Deepwater Horizon disaster in the Gulf of Mexico, Shell had committed to the use of blowout preventers with double shear rams, and to the development of two new systems for its Arctic venture: a well capping system that could close a subsea well in the event of a blowout preventer failure, and an oil containment system that would gather any oil leaking from an out-of-control well.
The company planned to deploy the capping and containment systems on a barge, near a midpoint between the Beaufort and Chukchi Sea drilling operations. The availability of these systems became part of Shell’s government-mandated oil spill prevention and response plans.
Several wells planned Shell hoped to drill up to two wells in the Sivulliq and Torpedo prospects in the Beaufort Sea and up to three wells in the Burger prospect in the Chukchi Sea in 2012. The Sivulliq and Torpedo prospects lie on the west side of Camden Bay, offshore the North Slope, to the east of Prudhoe Bay. Sivulliq, previously known as Hammerhead, contains a known oil accumulation. Burger, a structure 25 miles in diameter, lies about 80 miles offshore the western end of the North Slope and is known to contain a major natural gas pool — Shell has conducted a 3-D seismic survey over Burger and thinks that there is a high probability of finding oil in the prospect.
Shell planned to use the drillship Noble Discoverer in the Chukchi Sea and the floating drilling platform, the Kulluk, in the Beaufort Sea.
In December 2011 Superior Energy Services began work in Bellingham, Wash., on retrofitting the Arctic Challenger, an Arctic-class barge, to hold Shell’s new containment system. And in February 2012 the Bureau of Safety and Environmental Enforcement, or BSEE, approved Shell’s oil spill contingency plan for the Chukchi Sea.
Also in February, two appeals went into the U.S. Court of Appeals for the 9th Circuit: one appeal against BOEM approval of Shell’s Chukchi Sea exploration plan, and another appeal against the Environmental Protection Agency’s air permit for the Noble Discoverer. An appeal against approval of Shell’s Beaufort Sea exploration plan was already in progress in the same court.
Moving ahead At the end of February, in anticipation of further litigation, Shell took pre-emptive action by asking the federal District Court in Alaska to rule that BSEE had correctly approved the Chukchi Sea oil spill response plan. The company also asked for, and was subsequently granted, a restraining order against environmental activist organization Greenpeace, prohibiting Greenpeace from obstructing Shell’s Arctic operations.
In March BSEE approved Shell’s Beaufort Sea oil spill contingency plan and Shell asked the District Court to add this plan approval to the existing lawsuit requesting confirmation of the legality of the Chukchi Sea response plan.
And in March Shell took delivery of the MV Aiviq, a brand new 360-foot, 21,776-horsepower, Arctic-class anchor handler.
In late April Shell announced that it was starting to mobilize its Arctic drilling fleet. Then, at the beginning of May, the National Marine Fisheries Service issued incidental harassment authorizations, allowing the unintended minor disturbance of whales and seals during Shell’s drilling operations — Shell promptly filed another lawsuit request court confirmation of the validity of the authorizations.
Meantime, a nearly $100 million upgrade to the Kulluk was nearing completion, fitting the vessel with new emissions control equipment and with a new system for recovering drilling mud and cuttings.
In May the 9th Circuit court rejected the appeals against both the Beaufort Sea and the Chukchi Sea exploration plans.
Chukchi ice delay Everything appeared to be progressing to plan for Shell until early July, when the company announced that unusually heavy sea ice in the Chukchi Sea was delaying the start of the drilling program. The company had stationed its vessels at Dutch Harbor in the Aleutian Islands, in hopes of moving the fleet north through the Bering Strait as soon as possible.
At about the same time it became apparent that the retrofit of the Arctic Challenger with the new containment system had not been completed. And without the Arctic Challenger deployed, BSEE would not issue Shell’s drilling permits.
At the end of June Shell, having conducted some new emissions tests on the Noble Discoverer and on the upgraded Kulluk, informed the Environmental Protection Agency that the exhaust systems on the two vessels no longer fully complied with the stipulations in the vessels’ air permits. Under the terms of its air permit the Kulluk would be able to operate as planned, pending an EPA decision on the change request. But, with the Kulluk having a major permit, Shell needed an EPA compliance order before the Discoverer could go into operation.
The EPA did in the event issue the required compliance order.
On July 14 the Noble Discover, still positioned at Dutch Harbor, dragged its harbor and drifted close to the shore before being towed back into position by a tug.
Ice finally clears Several weeks passed, with Shell’s fleet still on hold at Dutch Harbor. The Chukchi Sea ice cleared, but the Arctic Challenger remained in dock in Bellingham, awaiting completion of the containment system retrofit and subsequent vessel certification by the U.S. Coast Guard.
Around the beginning of August three vessels from Shell’s fleet departed Dutch Harbor for the Chukchi and Beaufort seas to start preparing Shell’s drilling sites. But with the delayed start to the drilling season Shell said that it was cutting back its drilling expectations to just one complete well in the Chukchi Sea and one complete well in the Beaufort, with the possibility of also drilling some top sections of other wells.
On Aug. 20 the Kulluk departed Dutch Harbor for the Beaufort Sea and on Aug. 25 the Noble Discoverer left for the Chukchi Sea. On Aug. 30 BSEE issued a drilling permit, allowing the drilling of the top section of Shell’s first Burger well, with drilling limited to depths substantially above any potential hydrocarbon bearing zone. Permission to drill into hydrocarbons would have to wait until the deployment of the Arctic Challenger.
The Noble Discoverer finally started drilling at Burger at 4:30 a.m. on Sept. 9, at which time the Kulluk was in a holding position in the Beaufort Sea, waiting for the end of the annual subsistence whale hunt.
On Sept. 10, less than two days after the start of drilling, Shell had to move the Noble Discoverer off the well site, as a 12-mile by 30-mile ice floe started drifting towards the drilling site.
On Sept. 17 Shell announced that the containment dome on the Arctic Challenger had been damaged during testing of the containment system and that, consequently, the company would only drill the top hole sections of wells in 2012, a plan that BSEE subsequently approved.
Shell later said that the problem with the containment dome test was the result of an electrical fault that had caused a valve to open and the dome to descend rapidly in the sea. According to internal BSEE emails obtained by a Seattle radio station, the top of the dome was “crushed like a beer can.”
Top hole sections drilled Drilling eventually restarted at Burger, while the Kulluk moved into action in early October, starting the drilling of a top hole at Sivulliq. And, by the time that the drilling season drew to a close at the end of October the two rigs had completed the top holes sections — the upper 1,400 to 1,500 feet — of one well at Burger and one well at Sivulliq, in preparation for completing the wells in 2013.
Shell’s fleet subsequently returned to Dutch Harbor for demobilization.
The company put on a brave face over its curtailed drilling program, saying that the drilling of the top holes involved more than half of the time required to completely drill the wells. The 2012 operation had involved the successful deployment of a large number of assets and the rotation of thousands of employees to the Arctic, the company said.
But Shell’s difficulties in 2012 were far from over.
A loud bang from the Noble Discoverer caught people’s attention at Dutch Harbor when the drilling vessel returned to the port. It turned out that an engine on the vessel had backfired, with the crew having to extinguish a resulting small residual fire.
Discoverer in Seward The Noble Discoverer transited to Seward on the Kenai Peninsula, with the intent of moving from there to the U.S. West Coast for maintenance. However, upon arrival in Seward the crew reported a problem with the vessel’s propulsion system. Coast Guard inspectors called to investigate the problem spotted deficiencies in some crew safety and pollution prevention systems. The Coast Guard placed a detention order on the vessel while essential repairs were carried out. And Noble Corp., the owner and operator of the drillship, said that it had found some non-compliance issues, including the possible unauthorized discharge of collected water outside the period of drilling operations.
With the propulsion system not yet repaired, the Noble Discoverer remains in Seward. Shell says that it plans to tow the vessel to the West Coast once it has assembled the necessary assets to carry out the towing operation.
Meantime, with Shell having decided to have maintenance and repair work done on the Kulluk on the U.S. West Coast in preparation for the 2013 drilling season, the Aiviq set out from Dutch Harbor on Dec. 21 with the Kulluk under tow, heading for the Seattle area and following a route paralleling the coastline.
Kulluk encounters storm On Dec. 27 during a raging storm in the Gulf of Alaska the hawser connecting the Aiviq and the Kulluk broke. A few hours later problems compounded when all four of the Aiviq’s engines failed about 60 miles south of Kodiak Island. Despite heroic efforts by the U.S. Coast Guard, the crews of Shell’s vessels and a tug deployed from Valdez, the Kulluk, carried north by a severe gale, ran aground on the shore of Sitkalidak Island to the southeast of Kodiak Island on Dec. 31.
By the time of the grounding a full-scale emergency response had been initiated and a unified command formed to manage the response effort. The incident management team succeeded in refloating the Kulluk on Jan. 7 and the drilling platform is now anchored in Kiliuda Bay on the south side of Kodiak Island, undergoing inspections that will enable a decision on when and how to move the vessel for repair.
So far no evidence of any environmental impact from the grounding has been found and there have been no significant injuries. As responsible party, Shell is footing the bill for the emergency response effort and the recovery of the Kulluk. The Coast Guard has initiated an investigation into the incident and Shell has said that it will participate in the investigation and implement any lessons learned.
Environmental organizations, all of which have strenuously opposed Shell’s plans for oil exploration on the Arctic continental shelf, have cited Shell misfortunes, the Kulluk incident in particular, as evidence that oil drilling in the remote and challenging Arctic offshore environment poses too high an environmental risk to be acceptable.
Shell, for its part, has consistently claimed that the types of well it has started drilling in the Beaufort and Chukchi seas will prove very straightforward to complete and pose little risk of an oil spill. The company has assembled a self-contained oil spill response fleet which the company says is capable of dealing an oil spill in unlikely event of a drilling accident. And government regulators, in issuing Shell’s permits, have tended to support Shell’s position.
| 