Shell announces return to Arctic in 2014 despite mishaps

Posted on October 31, 2013 at 5:25 am by Jennifer A. Dlouhy

Waves crash over the drilling unit Kulluk where it sat aground on the southeast side of Sitkalidak Island, Alaska, Jan. 1, 2013. (U.S. Coast Guard photo by Petty Officer 3rd Class/Jonathan Klingenberg.)

WASHINGTON — Shell officials on Thursday said the oil company plans to make another, dramatically scaled-back bid to find crude in Arctic waters, following a headline-grabbing 2012 season that left the firm with air pollution fines and embarrassing equipment failures.

But first, the company is preparing to scrap the floating Kulluk conical drilling unit, which ran aground near an Alaskan island on Dec. 31 after a five-day fight to tow the vessel through a fierce storm. Shell has contractedTransocean’s semi-submersible drilling unit Polar Pioneer to replace the Kulluk as soon as early 2014, while final assessments are made on whether it is cost effective to repair the damaged drilling unit in an Asian shipyard.

Simon Henry, Shell’s chief financial officer, said the company was bracing for a fourth quarter impairment of “a few hundred million dollars” if the Kulluk’s repair costs exceed the benefits of rehabilitating the 30-year-old vessel.

The disclosure, which came during a call with reporters to discuss Royal Dutch Shell’s third-quarter earnings, ends months of speculation about whether the firm would be ready to return to the Chukchi and Beaufort seas north of Alaska once ice clears next summer...

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