This month may mark the end of a decade-long saga that’s highlighted the lengths to which oil companies will go to drill in the Arctic—and the huge risks such endeavors entail.
If everything goes according to plan, Royal Dutch Shell will soon bury its first drill bit into the Arctic seabed since 2012. The exploration project, which began in 2005, has faced numerous setbacks—logistical issues, expensive equipment repairs, regulatory hurdles, environmental challenges. To date, Shell has sunk more than $7 billion into this hunt for oil and natural gas, and even if successful, it won't see anything resembling financial success for more than a decade. But if it hits the substantial deposit of oil it believes to be under the Chukchi Sea, the payoff could be enormous.
That's because, in the next few decades, companies expect it will become harder to extract oil and gas from existing wells, and even the fracking boom may begin to deplete. The race is on to find untapped resources, with companies pushing further and further into harder-to-reach areas.
As the warming ocean and atmosphere has melted Arctic ice, companies have particularly eyed the Chukchi sea for its fossil fuels. The U.S. Geological Survey estimates the wider region contains 30 percent of the world’s undiscovered gas and 13 percent of its oil. Shell purchased its first leases here nearly a decade ago, and it is determined to see a return on its investment.
Shell reached this stage once before, drilling two wells in 2012. But the trip was plagued with problems. At the time, Shell underestimated Arctic dangers and overestimated how much time it had before heavy ice and storms made travel dangerous. The New York Times chronicled the mishaps in a lengthy and dramatic article: One rig, the Noble Discoverer, appeared to ground before reaching the Chukchi that July. Shell’s voluntary spill containment was crushed. A rig caught fire. From there, it got worse: The lines attaching the old rig Shell used, the Kulluk, to towing boats broke, the rig ran aground, and the Coast Guard had to rescue the 18 men trapped aboard it. These setbacks have helped bolster environmentalists' case that the Arctic is too dangerous to drill.
This time around, Shell has planned to drill two more wells. Two oil rigs, 29 ships and seven aircraft are currently making their way north—an even bigger fleet than the one the company assembled for its previous trip to the Chukchi. Shell says it has never been better prepared, insisting to the Wall Street Journal that the risks today are “negligible.”
Environmentalists certainly don't feel that way. Before one of the two rigs even left its Seattle port in mid-June, about two-dozen activists took to the water in kayaks, in an attempt to block the rig from leaving port.
There have been other hurdles. Shell's original plan was to use the two rigs to drill for oil simultaneously, nine miles apart. A backup rig is already required in the aftermath of BP’s 2010 Deepwater Horizon disaster, and Shell figured it would put it to good multitasking. The rigs would double the efficiency of the drilling operations and meet federal requirements in case of a blowout. In a win for environmentalists, however, federal regulators decided in June against Shell’s plans to speed things along, citing the harm simultaneous drilling could cause walruses.
And then, just last week, Shell found a 39-inch gash in its vessel, called the Fennica, which contains a crucial piece to cap a well in the case of a blowout. Shell has taken it to Portland for repairs, and says there’s no reason it will delay the start date for drilling in late July. “We do not anticipate any impact on our season, as we don’t expect to require the vessel until August,” a spokesperson for Shell told Joel Connelly. Greenpeace USA spokesperson Travis Nichols disagreed, saying the company can’t possibly begin work on schedule without the essential equipment.
Shell is still waiting for a final permit from the Department of Interior before it can begin drilling. Department spokesperson Jessica Kershaw said they are watching the situation closely. “We continue to review Shell’s proposal for drilling activity in the Chukchi Sea this summer,” Kershaw said. “As we’ve said from day one, Shell will be held to highest safety and environmental standards. This includes having on hand the required emergency response systems necessary for each phase of its drilling program.”
Even as a long-term prospect, Shell is years behind schedule as the problems add up. And it can't afford another slow season this year. The company faces pressure to prove to investors it can deliver on its $7 billion bet. By 2017, the Times reported, Shell's first leases will expire if it doesn’t begin producing oil a decade after it first acquired them.
“Everybody’s watching to see if we’re going to fail or succeed out there,” Ann Pickard, Shell’s Executive Vice President running its Arctic division, told the Wall Street Journal. “If we fail for whatever reason … I think the U.S. is another 25 years” away from developing Arctic resources.
So even minor delays this year—like an incident akin to 2012’s—could be devastating to Shell. Above all else, it faces natural challenges. The weather is fickle, sea ice doesn’t always melt on schedule, and there’s a limited window of a few months a year when the Arctic is calm enough to drill. Interior has given Shell a hard stop to drilling in late September.
Environmentalists say that this pressure is exactly what makes Shell prone to risky decisions. “The Fennica could have easily travelled along a much safer route instead of going over a shallow, rocky shoal in an area that to begin with is not well charted,” said Chris Krenz, Arctic campaign manager and senior scientist for Oceana, an ocean advocacy organization campaigning against Shell’s oil development, in a statement.
If Shell continues, environmentalists warn it’s only a matter of time before the next big disaster strikes. “I don’t think it’s possible for anyone to have a ‘perfect season’ in the Arctic,” Nichols said. “The margin of error is so slim. Things that fly in the Gulf [of Mexico], even though they shouldn’t,” won’t in the Arctic “because conditions are so hard."