U.S. to allow Shell to begin prep work for drilling in Arctic

Royal Dutch Shell (RDSa.L) will be allowed to begin some "limited" drilling in Alaska's Chukchi Sea, the U.S. government said on Thursday, a move the company hailed as a step forward in its long-delayed effort to tap Arctic oil.

The U.S. Interior Department said Shell will be permitted to begin preparatory work in the Chukchi, but cannot drill to areas containing oil until the government certifies its oil spill containment system.

Without that containment system, the department has said it will not allow Shell to drill for oil in the Arctic.

"At this point we don't know what exactly is going to happen with Shell and whether they are going to be able to complete a well in the Arctic this year," Interior Secretary Ken Salazar told a conference call with reporters.

Shell's Arctic drilling plans had appeared on track to begin this year but it has run into delays. The company has spent $4.5 billion so far in its effort to explore for oil and gas off Alaska's coast.

In addition to seeking modifications to its air-quality permits from the U.S. Environmental Protection Agency, Shell is also still working to get its oil-spill containment barge, the Arctic Challenger, approved by the Coast Guard.

Shell's vice president for Alaska Pete Slaiby said the government's decision to allow some drilling was "exciting".

He said that even if Shell's activities this year were limited to top-hole drilling, that would be an important accomplishment.

"This is really important to begin to establish confidence that we can do this right," Slaiby told reporters in Anchorage.

"All this work on top holes is clearly going to help us, as well as put real wind in our sails for 2013."

Facing delays, Shell has asked the government to extend its oil drilling season in the Chukchi beyond the September 24 deadline currently in place. Without an extension, the chances of completing a well this year are slim, Slaiby said.

Salazar said Thursday it would be premature to decide on that request until Shell received its final approvals.

Environmental groups said Shell has not met the obligations laid out in its drilling plans and should not be allowed to move forward at this point.

"The Interior Secretary appears to be bending over backwards to accommodate a multi-national corporation that can't get its act together," said Mike LeVine of Oceana, an ocean conservation group.

Shell began picking up leases for offshore Alaska in 2005, but intense opposition from environmentalists and native groups scuttled previous plans.

[Source: By Ayesha Rascoe and Yereth Rosen, Reuters, Anchorage and Washington, 30Aug12]

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