Shell to tow two drill ships from Alaska to Asia for repairs

Royal Dutch Shell has announced that it will be dry towing its two drill ships anchored in Alaska to ports in Asia for repairs. This means that it likely won’t be drilling in the Alaskan Arctic this summer unless the fixes are somehow completed in time. Two ships are needed whenever drilling is taking place: One for the actual drilling, and one able to drill relief wells if necessary in the case of a blowout. Shell has no other ships suitable for drilling in the Arctic, and the need for repairs make one wonder whether even its two existing ships, the Noble Discoverer and the Kulluk, are suitable at all. The Noble Discoverer, built in 1966, nearly had an accident this summer when it dragged its anchor and came close to grounding in Dutch Harbor. When it was sitting in port, the smokestack caught on fire, too. Curtis Smith, spokesman for Shell Alaska, compared the fire to a car engine backfiring, stating, “Ever seen a small flame out of a car when it backfires? This is the same. It is a minor issue. It is not an incident.” In the Alaska Dispatch, however, others described the fire as more severe. The repairs, however, are unrelated to the fire, and will instead address separate problems with the main propulsion system and engine.

The Kulluk will soon make its way to Dutch Harbor before making its way to a yet to be determined dry dock in Asia. The damaged oil rig is currently anchored in Kiliuda Bay, thirty miles north of where it grounded. The Kulluk was built in 1983 and drilled some exploratory wells in the late ’80s and early ’90s in the Beaufort Sea before being mothballed for fourteen years in McKinley Bay, 80 kilometers east of Tuktoyaktuk, Northwest Territories. Shell purchased the ship, due to be sold for scrap, and refurbished it. The grounding of the ship in December 2012 caused structural damage to the hull, electrical damage, and saltwater intrusion.

The accident brought Shell’s plans to drill in the Arctic, in which it has already invested $4.5 billion, under even more intense scrutiny. Members of the Obama administration, which previously advocated offshore drilling in Alaska, expressed doubts about it last month. Secretary of the Interior, Ken Salazar, who will soon be stepping down, observed presciently at an offshore drilling advisory panel meeting in the nation’s capital last month, “It may be that Shell isn’t even ready to move forward with drilling in 2013.” The gravity of the situation is clear, as Salazar stated last summer (with only a touch of drama), “We are at the beginning of deciding the whole future of the Arctic of the earth.” In an editorial in Bloomberg, published last month, two other prominent policymakers, who previously supported drilling in the Arctic, had an about-face. Carol Browner, former director of the White House Office of Energy and Climate Change policy, and John Podesta, chairman of the Center for American Progress and former chief of staff to President Bill Clinton, wrote that although sea ice melted to record lows last summer since satellite records began, that doesn’t mean we should rush to drill. “Just because we can access them doesn’t mean we can safely extract them. The Obama administration should hit the pause button on Arctic offshore drilling with relatively little damage done,” they offered.

Senator Mark Begich (D-Alaska), a staunch supporter of the oil industry in Alaska, expressed in the New York Times last month that he would frown upon additional delays. He noted, “Because of the logistical requirements, this could easily be a three-year delay…In the Gulf of Mexico, a year means a year. In the Arctic, a year would mean three.” Ships, helicopters, employees, and all sorts of other infrastructure and search and rescue capabilities need to be put in place well in advance of the short drilling season. If there is any sort of delay, then drilling activities can be pushed back at least one year. Thus, the question isn’t even really whether Shell’s ships will be repaired in time for the summer of 2013, but even the summer of 2014.

The unforeseen delay will give government agencies and environmentalists alike more time to scrutinize Arctic drilling plans. Other oil companies seem content to maintain a wait-and-see approach before undertaking their own activities in the Alaskan Arctic. A spokesperson for Statoil, which has 16 leases in the Chukchi Sea, said in an interview with Reuters last September, “We will not be drilling in 2014, and we have not made a decision to drill.” He added, “We are obviously watching the process that Shell’s going through.” Of course, Statoil still plans to drill nine wells this coming summer on home turf, in the tried and true waters of the Barents Sea. By contrast, Total, the French oil company, has completely disavowed drilling in the Arctic. In September, CEO Christophe de Margerie said in an interview with the Financial Times, “Oil on Greenland would be a disaster…A leak would do too much damage to the image of the company.”

ConocoPhillips is one of the few oil companies still moving forward with its plans in Alaska, which the Bureau of Ocean Energy Management is currently reviewing. The company hopes to begin drilling in the summer of 2014 near Devil’s Paw in the Chukchi Sea. A synopsis of their plans is available online.

The towing of the ships to the Far East from Alaska underscores the importance of Asian shipyards in designing, building, and repairing ships for the Arctic. The Kulluk was built in Japan by the Mitsui company in 1982, and it will now go back to Asia, as the continent is home to the world’s largest dry docks. South Korea, which has the world’s largest shipbuilding industry, will fix the Noble Discoverer. Though the shipyards in Seattle, which have been operating for at least 90 years, are able to make some repairs, Shell has instead decided to tow its vessels on the two to three week voyage across the Pacific to docks in Asia. The shipbuilding industry is comparatively young in South Korea and Japan, but these two countries have leapfrogged over competitors to become the world’s premier suppliers of Arctic-ready ships. Perhaps this will add more legitimacy to the Asian states’ applications for permanent observer status in the Arctic Council: If these countries already form an integral part of the Arctic supply chain, why not become an integral part of the Arctic political space?