Things getting bleaker this week for Shell's arctic ambitions

big scaling back by Shell for its summer drilling program:

[B][I]Shell Alters Alaska Drilling Plans[/I][/B]

by Karen Boman
Rigzone Staff
Friday, July 27, 2012

Shell has revised its drilling plans for offshore Alaska due to the presence of ice and ongoing certification efforts for its oil spill containment system.

Shell CEO Peter Voser told analysts Thursday that the company now plans to two drill wells offshore Alaska this year and to prepare for additional drilling next year.

“We have already applied for more so that we can actually continue next year to drill,” Voser commented during the company’s earnings call on Thursday.

The normal drilling season would start have started in mid-July offshore Alaska, Voser said.

“This year, it’s later, so we expect the ice to be gone most probably within the next two weeks.”

The ice this year is the thickest seen in the last decade, Voser noted.

Shell is working together with the U.S. Coast Guard to complete the certification of the oil spill containment system. The system is the first of its kind worldwide, “which stretches also the Coast Guard a little bit from the permitting point of view.”

Shell’s drilling activity in the Beaufort Sea also will be delayed to allow local communities to conduct whale hunting, Voser said.

Besides a limited window of time due to ice, the company has faced a number of challenges in pursuing its Arctic exploration drilling plans offshore Alaska, including opposition from environmental groups and completion of construction on the oil spill containment system Arctic Challenger.

Dow Jones reported in July 25 that Shell has sought permissions from the Obama administration to get permission for an early start on planned wells in the Arctic Ocean. Shell can’t begin drilling in the Chukchi and Beaufort Seas until the vessel is in place.

A drillship leased by Shell for its Arctic exploration plans also drifted off its moorings while anchored offshore Alaska, narrowly missing the shore, according to a July 16 Dow Jones newswires report.

Oh well, can’t blame Noble for this one but I wished I could…

Pity for Shell…can you imagine the massive pipeline of money that is flowing from Shell’s Houston HQ these days? To Noble, to ECO, to Harvey Gulf, to the owner of the European vessels on hire? Gotta be $2M a day just for the floating equipment.

Just a little bit more from the business press on the clowncircus that is Shell Alaska…

[B][U]A Big Chill for Shell’s Arctic Drilling Plans[/U][/B]

A series of mishaps is putting billions of spending in jeopardy

Jul 31, 2012, 9:12 am EDT | By Aaron Levitt, InvestorPlace Contributor

With energy demand not abating anytime soon, energy companies have gone looking far and wide (and deep) for new oil and gas reserves to meet that demand. Perhaps the most ambitious — and costly — effort so far has been Royal Dutch Shell’s (NYSE:RDS-A, RDS-B) plan to drill for hydrocarbons in Alaska’s frozen seas. Europe’s biggest integrated oil company has spent about $4.5 billion since 2005 on leases, permits and various equipment to reach an estimated 20 billion barrels in fields off of the northernmost U.S. city, Barrow, Alaska.

The promise is certainly great as preliminary results for the Arctic Ocean are staggering. The region, including the Chukchi and Beaufort Seas, is estimated to contain enough reserves to fuel 25 million cars for 35 years.

While Shell trails rival Exxon Mobil in tapping the Arctic, it may have to wait yet a little longer. Hit by the trio of regulatory issues, environmental scrutiny and fast approaching sea ice, [B]Shell may have to abandon its plans for beginning to drill in the Arctic this summer[/B]. The rest of the energy industry is watching Shell’s actions closely — and so should investors.

[U]Elusive Goal[/U]

Shell was planning to drill as many as five exploratory wells this summer in the Chukchi and Beaufort seas during a brief window between July and October, when the waters are typically clear of severe ice. However, Pete Slaiby, Shell’s vice president for Alaska operations, recently reported that the company is unlikely to meet that goal due to regulatory challenges and stubborn ice.

Actually, it’s been one setback after another for Shell in the region. In early June, it announced that the generators on its Discoverer drilling rig — rented from Noble (NYSE:NE) — couldn’t meet Environmental Protection Agency emission standards for nitrous oxide and ammonia.

Then in mid-July, the Discoverer slipped its anchor in Alaska’s Dutch Harbor and drifted perilously close to the shore. Although Shell said the ship suffered no damage, the incident offered ammunition to critics. Greenpeace and Alaska’s Inuit native community have pounced on the mishap, contending it’s just a taste of what’s to come from the project and that an oil spill will pollute the waters and damage Alaska’s economy.

Additionally, in June the Coast Guard raised questions about the durability of one of Shell’s underwater oil-spill containment vessels in severe weather. The Arctic Challenger oil-spill containment barge was a key selling feature and a critical piece of equipment for the project. The vessel has been held at port in Washington, and the Coast Guard hasn’t yet certified it to operate.

Meanwhile, time keeps ticking as the thickening winter ice pack looms. Despite sparse coverage in most of the Arctic Ocean, ice in the Chukchi Sea this summer is still too thick to allow ship traffic. According to Shell’s permits, all operations must cease by Oct. 31,and drilling must be suspended during the fall Inupiat whale hunting season.

Additionally, drilling into the Chukchi Sea’s hydrocarbon-bearing zones must cease 38 days prior to the Oct. 31 deadline. This doesn’t give Shell much time considering all the setbacks.

[U]Closely Watching[/U]

It has been seven years since Shell obtained its first leases for U.S. Arctic exploration, and the recent mishaps aren’t speeding up its operations. These problems could discourage companies such as ConocoPhillips (NYSE:COP) and Statoil (NYSE:STO), which also hold leases in the region, from pursuing Arctic opportunities. It may not be as critical as the shale revolution, but the revival in Alaska could be a major contributor to America’s pending energy independence. Wasting that opportunity is a cause for concern.

From an investor’s point of view, the setbacks are also hard to shallow. Much of my enthusiasm for Shell stock stems from the company’s willingness to think long-term and devote itself to these unconventional projects. Given the outlook for energy demand, it will clearly require developing alternatives, like drilling in the Arctic.

Yet, exercises like this are expensive, and so far Shell has had nothing to show for its spending. While I wouldn’t be selling my shares today, [B]any additional mishaps or setbacks with Shell’s unconventional holdings might have me rethinking my position[/B]. Until then, I’m keeping the firm in my portfolio.

Everybody here should know by now that I am a huge proponent of developing the energy potential of the high arctic but at the same time, I know a clown circus when I see one. Whoever was in put in charge of this big show needs to be fired from Shell and get a position on the faculty of the Krusty the Klown Kollege. Then Shell needs to find people with REAL Alaskan operations experience.

Just another article from yesterday’s press

[u]Shell Hits Roadblocks in Arctic Drilling[/u]

Ice and EPA Regulations Delay Projects

By Swagato Chakravorty Monday, July 30th, 2012

Environmental causes and human bureaucracy are conspiring to delay Royal Dutch Shell’s (NYSE: RDS.A) drilling of around five exploratory wells in the Arctic waters off Alaska’s coast.

Extensive ice on the seas and an inability to meet EPA emissions standards may cause Shell to run a very tight deadline, since it cannot continue any operations beyond October 31.

The drilling was set to take place in the Chukchi Sea in northwestern Alaska, where there would be three wells, and in the Beaufort Sea, where there would be two.

Reuters reports:

“We’ve recalibrated what’s possible, based on weather and logistics this year. No matter how that turns out, we’re trying to make the most of the time that we do have in the theater,” said Curtis Smith, Shell’s spokesman in Alaska.

Shell had originally intended to begin drilling operations as early as July 1. However, ice cover has been denser than usual, and that means dangerous or even impossible conditions for ship passage.

Currently, Shell’s ships are anchored at Dutch Harbor, which is almost a thousand miles away from their drilling locations. Moreover, a crucial barge, the Arctic Challenger, hasn’t even been cleared by the U.S. Coast Guard. No clearance means no permits.

The emissions issue is a third problem for Shell. Back in June, they had appealed to the EPA to relax emissions standards for nitrogen oxides and other particulates and to completely lift limits on ammonia emissions for the Noble Discoverer drilling ship, according to Reuters.

The company’s statement claimed that they could not meet EPA expectations given current technology.

The EPA’s response has not been released, but they have said:

“…using the tools we have under the Clean Air Act, we can protect air quality while providing the EPA approvals required for Shell to operate this summer.”

However, Shell appears far more concerned about the ice. Expectations are that the ice will begin to retreat adequately in the first week of August.

But a new complication results from rules stating that any drilling into hydrocarbon-bearing regions must end at least 38 days before October 31.

Shell may not actually get into any oil this year at all, but that remains to be seen.

Critics of marine oil operations have already sounded out their views on the caprices and risks inherent in working within an oceanic environment. The memory of Deepwater Horizon remains a fresh one.

I think it does bear to note that tomorrow is the first of August and the fleet is still sitting in Dutch, That alone is all that needs to be realized that this is already not going to be a successful season for Shell. Whether they come back with anything at all is I believe the question now?

Oh well, 2008 was a bust for Shell and if 2012 is a limited year then maybe the third time will be charmed…MAYBE!

WHAT ICE?

I frequently check the ice charts on cryoshere today. Here is a link to yesterday’s chart. http://arctic.atmos.uiuc.edu/cryosphere/NEWIMAGES/arctic.seaice.color.000.png

The Chukchi Sea and the Beaufort Sea are virtually ice free, and have been for weeks. Check the 30 day animation. Oh yes, there is a little tiny finger of 40% ice cover off Barrow. So what? If they cannot handle that, then they’d better stay home.

It makes one wonder if Shell is blaming ice conditions just to cover up all their other screw ups. Do they think that nobody is going to check the ice conditions?

Impressive graphic. I know that Crowley makes deliveries as far as Kaktovik this time of year. It’s not drilling. However, there are vessels working that area.

Chukchi Sea ice coverage well below average. http://arctic.atmos.uiuc.edu/cryosphere/IMAGES/recent365.anom.region.10.html

Beaufort Sea ice coverage well below average. http://arctic.atmos.uiuc.edu/cryosphere/IMAGES/recent365.anom.region.11.html

Comparison of ice coverage on July 1st to July 30th http://igloo.atmos.uiuc.edu/cgi-bin/test/print.sh?fm=07&fd=01&fy=2012&sm=07&sd=30&sy=2012

Comparison of ice coverage on July 30, 2011 (last year) to July 30th, 2012 (this year) http://igloo.atmos.uiuc.edu/cgi-bin/test/print.sh?fm=07&fd=30&fy=2011&sm=07&sd=30&sy=2012

The Northwest Passage is already close to being ice free. http://arctic.atmos.uiuc.edu/cryosphere/NEWIMAGES/arctic.seaice.color.004.png

The neat feature of Cryosphere Today is that you can view and compare ice coverage on any two days from 1978 to present.

It looks as if 2012 may turn out to set a new record for minimum polar ice coverage.

As far as ice is concerned, Shell should have arrived off Kotzebue at about the time they arrived in Dutch Harbor. I certainly cannot see any reason — related to ice conditions — that they should not already be drilling now.

Does anyone have the Lat / Long of where they planned to drill this year?

Was up with one of Crowley’s ATBs just off of Barrow last year until about mid September… there was no ice. None (around Barrow). The weather was actually pleasant for weeks on end too.

[QUOTE=tugsailor;76888]As far as ice is concerned, Shell should have arrived off Kotzebue at about the time they arrived in Dutch Harbor. I certainly cannot see any reason — related to ice conditions — that they should not already be drilling now.

Does anyone have the Lat / Long of where they planned to drill this year?[/QUOTE]

It is becoming more apparent that Shell knows that they’re not going to drill FUCKALL this season and even more apparent that they’re trying desperately to find a way to pass the blame on the supposed bad ice conditions which can be seen by any observer as patent BULLSHIT! You’re right tug…there is NO ice there. There’s no worse conditions in 10 years! There’s nothing but blue open water. Somebody FUCKED UP at Shell big time but as mentioned previously by me, in Shell’s eyes, they’ve done nothing wrong throughout and I am of the opinion that is all is smoke to keep shareholders from demanding to know “WTF Shell…why aren’t you drilling yet?”

I am looking to find at least a graphic of the two well sites that Shell “says” their still going to drill this year.

I say that they’re proving to be not just a clown circus but a SHITTY one at that!

It has to be a conspiracy of some kind. If this is just a screw up from upper managment, this is going to run into the Billions before it is over.

Wonder how they will cover it up when NBC news figures out there is no ice up there?

http://dutchharbortelegraph.com/

Scroll to below the Police Blotter for several local articles on the topic.

Daily satellite ice coverage data is as readily available to Shell as it is to the public. Barrow, Kotzebue, and Prudhoe Bay all have airports with large runways that handle jet aircraft on a daily basis. It would seem that Shell must have already established helicopter support bases in Barrow and/or Prudhoe Bay. I cannot imagine why Shell is not doing daily fly overs for close observation of ice conditions.

Another thing, the wind and sea conditions up in the Chukchi Sea are usually quite mild compared to the Bering Sea. The Chukchi is often flat calm. Its relatively warm and sunny most of the summer. There is very little rain. Shell’s vessels would be a lot safer standing by in the Chukchi than they are in Dutch Harbor.

Its going to be amusing when the passenger ships start steaming through the Northwest Passage and arriving in the Pacific, while Shell is still dragging anchor back and forth across Dutch Harbor and prattling on about how “unusually heavy ice conditions” in the Arctic have prevented them from going up there to drill.

I bet Greenpeace knows how to find and use publicly available satellite data.

Ive been up here in Dutch for the last 3 months watching the Shell presence grow and grow. The weather has been great and the company I work for has been operating up north for the past few months in perfect weather. The Shell people here in town seem pretty happy at the bar every night and at the seafood buffet and so forth. I do know that in about a month and a half or 2 months it will be to late for them to go north. Its ok, our gas prices will pay for this boon-doggle.

Heard the other day from shell employee everyday indutch 33 million.

[QUOTE=jmad;76982]Heard the other day from shell employee everyday indutch 33 million.[/QUOTE]

No way…CAN’T be $33M! Say 15 vessels on hire with an “average” of $200k/day for each would only be $3M for vessels. Logistics could be $1M/day more.

Shit at $33M per day would be $100M every three days or $1B per month! As much as Shell has some deep pockets and a strong stomach, they ain’t that deep or strong!

I say more likely $3.3M/day which still makes for $10M every three days or $100M per month…certainly not chump change for this unwashed beggar!

say brother…can ya spare $100M? I’ll let you drink some of my Mad Dog!

.

I am convinced now the whole ice bullshit lie is to blow smoke at the investors to cover up the massive failure in execution of Shell’s brilliant foolproof Arctic Exploration plan! If it’s ice that’s keeping us from drilling then it’s God’s fault…not our’s, because we’re not fallible…we’re SHELL OIL!

Hardly fool proof when it is fools who wrote the plan in the first place and then were the one’s responsible to make it so. I never thought for one minute that Shell would have such people on its team but then again Shell also owns 1/2 of the BULLY drillships as well! Only a stupid foolish major oil company would buy 1/2 of some other company’s ridiculously flawed design and then let that company oversee the construction when those same people had no record at all of building a new drillship and had hashed up all the conversions they had ever been involved with. Then once they discovered the bitch they had shacked up with was cheating on them Shell jumped right into the sack with another lowlife tramp and started throwing expensive gifts at them with promises that I will love you forever my dearest and you can have access to my checking account no matter what a meth addicated toothless drilling hag you might actually be!

(can you believe that is the same girl?)

First Frontier and the Noble…pretty much tells a person everything that needs to be heard!

.

Well that was just from two shell guys who knows so many rumors up here it’s a joke.

The four Beaufort sea drilling sites are 16 to 20 miles offshore very roughly in the area of 70 north / 145-146 west. That’s a long way from Dutch Harbor. This area has been ice free for at least a month, but there has been 60% pack ice off Barrow blocking clear transit.

Don’t hold back, let us know how you really feel!

ah…fuck!

  1. NOAA ice charts show first year and multiyear ice in Chuchki Sea.
  2. Shell and Noble will drill successfully this year in Arctic.
  3. C.Captain is a fucking idiot. His rage has made him stupid.