2012 was a tumultuous year for Shell in the Arctic. The company suffered some major mishaps and bad luck but also achieved important objectives by successfully starting two offshore exploration wells on its federal Outer Continental Shelf leases off Alaska's northern coasts.
Alaskans are closely watching Shell's progress because of the huge potential for new oil and gas discoveries in the OCS. Even though production from federally owned offshore areas would not benefit the state treasury, because no state taxes or royalties would be paid, new oil flowing through the Trans Alaska Pipeline System would be hugely beneficial.
However, Shell was not able to drill the two wells it started down to hydrocarbon-bearing zones because a specialized spill cleanup barge required to be nearby was not available. It was one of Shell's bad breaks: The barge was delayed in completion because of the complexity of its systems. Then an undersea containment dome that was part of the system was damaged in testing. Given that, the barge could not make it to the Arctic in time.
Shell's achievements were still notable, though, in that the company was able to finally surmount years of lawsuits and permit challenges to mobilize and get its small drill fleet to the Arctic, and then to safely conduct drilling. The curve balls from Lady Luck continued when a large ice floe came bearing down on Shell's drillship Noble Discover just after drilling had finally started. The ship pulled off the well and away from the slowly moving flow, which cost Shell a week before work could resume. There was a silver lining, though, in that the exercise demonstrated the flexibility of the drill fleet in dealing with Arctic hazards.
Fierce Winter Storm
Despite these achievements, the year ended on a sour note for Shell. A fierce winter storm hit the second of its two Arctic drill vessels, the Kulluk, while that rig was being towed across the Gulf of Alaska to the Pacific Northwest to undergo winter maintenance. Cut loose from its tow lines, the Kulluk grounded on a small island near the south shore of Kodiak.
It was a tough way to end the year. On the last day of 2012, the rig was separated from tow lines connecting it to tugs and washed ashore on Sitkalidak Island off Kodiak's southern shore. The tug and drill crews were fighting ferocious weather, with seas at 30 feet and more and high winds. The lines from the tow vessel to the rig had first separated a few days earlier and were...