Even if Shell is able to free its grounded Kulluk drilling rig from a rocky Alaskan island shore, it may be too damaged to resume hunting Arctic oil this summer.
The 29-year-old conical drilling unit is uniquely designed to weather floating ice, and replacements aren’t readily available. Even if Shell Oil Co. could find an Arctic-ready rig, it almost certainly would not secure air pollution permits for a different vessel in time to resume drilling wells this July.
“These are very specialized rigs,” noted Dave Pursell, managing director of the Houston-based energy investment bank Tudor Pickering Holt & Co. “If Shell figures out there’s enough damage they can’t get it repaired, I don’t know that they have enough time to acquire another.”
The Kulluk hit the rocks on Sitkalidak Island near Kodiak City, Alaska, on Dec. 31, following a five-day battle to tow the unpropelled rig to safe harbor amid 70-mph winds and waves that climbed four-stories high. Shell had been towing the 266-foot floating rig to a Seattle shipyard for repairs two months after it finished boring the first half of an exploratory oil well in the Beaufort Sea.
Salvage specialists are devising a plan to wrest the beached rig away from an area that is critical habitat for endangered Steller sea lions, threatened sea otters and other wildlife, without releasing some 140,000 gallons of diesel on board.
While there are no signs of a fuel leak, initial inspections reveal the Kulluk has sustained water and electrical damage.
The episode caps a series of recent mishaps in Shell’s seven-year, $5 billion quest for Arctic oil, including the drifting of the drillship Noble Discoverer in Dutch Harbor last July and damage to a unique oil spill containment system during a deployment drill last September.
The latest incident has stoked fears about the dangers of even routine operations in the icy waters around Alaska _ much less full-scale drilling operations high above the Arctic circle _ and environmentalists are pleading with the Obama administration to halt the work.
Shell stresses that the Kulluk and Discoverer incidents were maritime mishaps _ not drilling problems _ and notes that dozens of wells have been successfully bored into Arctic waters.
Shell used its other drilling unit, the Discoverer, to begin a well in the Chukchi Sea last summer. But under Shell’s government-approved oil spill response plans and broad drilling blueprints for the region, the company is obliged to have a second rig in the region to drill a relief well in case of an emergency.
Under that requirement, if neither the Kulluk nor a replacement rig is available, Shell would be blocked from oil drilling on the Chukchi and Beaufort sea leases it bought for $2.2 billion beginning in 2005.