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Shell Submits a Plan for New Exploration of Alaskan Arctic Oil

29/08/2014 by


Royal Dutch Shell submitted a plan to the federal government on Thursday to try once again to explore for oil in the Alaskan Arctic, following years of legal and logistical setbacks as well as dogged opposition from environmentalists.

While the plan is just a first step in the process, it reflects the energy potential in the Arctic. Shell’s proposed programs consist of two drilling rigs working simultaneously in the Chukchi Sea, which could produce more than 400,000 barrels of oil a day.

Shell emphasized that it had not made a final decision on whether to drill next summer. But it said that the filing with the Interior Department preserved its options.

The efforts, even in this preliminary stage, are likely to rankle environmentalists, who argue that drilling in the Arctic is overly risky because of ice floes, darkness in winter and the presence of several species of already threatened wildlife like polar bears. Several environmental groups were quick to say they would oppose Shell’s latest plan, including with court challenges, if it receives government approval.

Over the last eight years, Shell’s Alaskan Arctic efforts have been plagued by blunders and accidents involving ships and support equipment, reaching a climax with the grounding of one of its drilling vessels in late December 2012 in stormy seas. Environmental groups seized on the episodes as evidence to support their claims about the risks.

Shell, which has already spent about $6 billion on the effort, drilled two shallow wells in Alaska’s Arctic during 2012. But the federal government did not allow Shell to reach the deeper, oil-bearing formations. The company did not have the equipment to contain spills after the testing failure of a containment dome designed to cap a runaway well and collect oil in case of an accident.

After Shell’s problems, ConocoPhillips and the Norwegian oil giant Statoil suspended their Alaskan Arctic drilling plans.

Shell’s plans for the Alaskan Arctic had looked doubtful since Ben van Beurden took over as the company’s new chief executive nearly nine months ago. Mr. van Beurden pledged to increase discipline on rising costs and improve cash flow. Under his guidance, the company has begun to sell off underperforming natural gas and oil fields around the United States while stepping up production from its deep water Brazilian and Gulf of Mexico oil wells. Profit is improving, though Shell’s investments in Russia could be at risk if Western sanctions tighten.

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