Shell’s Drilling ‘Went Wrong’ in 2012, Salazar Says

Photographer: Chris Usher/U.S Coast Guard/AP Photo

Shell's Kulluk mobile drilling unit is towed by the tugs Aiviq and Nanuq in 29 mph winds and 20-foot seas 116 miles southwest of Kodiak City, Alaska, Sunday, Dec. 30, 2012. Close

Shell's Kulluk mobile drilling unit is towed by the tugs Aiviq and Nanuq in 29 mph... Read More

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Photographer: Chris Usher/U.S Coast Guard/AP Photo

Shell's Kulluk mobile drilling unit is towed by the tugs Aiviq and Nanuq in 29 mph winds and 20-foot seas 116 miles southwest of Kodiak City, Alaska, Sunday, Dec. 30, 2012.

U.S. Interior Secretary Ken Salazar said “things went wrong” in Royal Dutch Shell Plc (RDSA)’s oil exploration off Alaska’s Arctic coast in 2012 and the company might be unable to continue its work this year.

Salazar, who ordered an internal 60-day assessment yesterday of Shell’s drilling in the Beaufort and Chukchi seas, said potential damage to company’s Kulluk rig after it ran aground in a storm may force further delays in Arctic exploration.

“It’s troubling that there was such as series of mishaps,” Salazar said today after a Washington meeting of an offshore-drilling advisory panel. “There is a troubling sense I have that so many things went wrong.”

Shell spent about $4.5 billion in the past seven years seeking to drill in the Alaskan waters. On Dec. 31, the drill ship Kulluk broke free of a tugboat in a storm and was stranded on an uninhabited island until it was towed to a nearby harbor this week for examination.

“It may be that Shell isn’t even ready to move forward in 2013, because of assessments taking place of the Kulluk,” Salazar said.

Shell’s work also was set back when a containment dome designed to cap oil spills had difficulty getting U.S. certification and was damaged during tests in September. The drill ship Noble Discoverer slipped its mooring in July and drifted toward shore in the Aleutian Islands.

‘Not Prepared’

“We have seen enough accidents to know that right now Shell is not prepared to safely drill in the Arctic,” Representative Ed Markey, a Massachusetts Democrat, said in a statement yesterday.

The grounding of the Kulluk didn’t cause environmental damage and involved challenges in marine transportation, not Arctic drilling, Marvin Odum, president of Shell’s U.S. operations, said today at a Houston technology conference. Odum said he was “disappointed” the incident happened.

“Anything that doesn’t go exactly the way we want it to gives me pause,” he said. “We take this incident very, very seriously.”

The Interior Department assessment will help the company redouble its efforts, Kelly op de Weegh, a spokeswoman for The Hague-based company, said in an e-mail.

“We believe a review will demonstrate that the drilling operations went well,” she said. “It’s too early to speculate on any impacts to our ongoing exploration program. We will first complete an assessment of the Kulluk.”

Salazar was greeted by activists opposed to Arctic drilling when he arrived today at the meeting of the independent advisory panel today. He said the administration is committed to having exploration of oil in that region, but he wasn’t sure it would happen this year. According to Interior safety guidelines, Shell needs to have two rigs in the Arctic if it is drilling into “the hydrocarbon zone,” he said, referring to the reservoirs of oil.

“The Arctic is an area where our policy has been that we should move forward with the utmost of caution,” he said. “We need to find out what is there.”

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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