Setback for Shell's Arctic oil ambitions as rigs require repair in Asia

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Royal Dutch Shell’s hopes of resuming drilling for oil off Alaska this summer have suffered a further setback after it revealed both its Arctic drilling rigs would now need to be taken to Asia for repairs.

The oil giant has admitted it does not know whether it will be able to continue its controversial campaign this year after a series of setbacks in 2012 , including the grounding of its Kulluk drilling rig on New Year’s Eve and problems with its second rig, the Noble Discoverer.

However its exploration plans for 2013, set out a fortnight ago, showed it still was still intending to resume the work. It has so far spent nearly $5bn on its Arctic campaign without being allowed to drill into potentially oil-bearing rocks.

The Kulluk was being towed from Alaska to its winter harbour of Seattle where it was due to undergo maintenance when it ran aground and was damaged.

Shell (LSE: RDSB.L - news) said yesterday that “ongoing evaluations of the condition of the Kulluk” had led it to determine the rig would now need to be “dry towed to a shipyard in Asia with a suitable dry dock”.

The US Coast Guard highlighted a series of problems with safety management and pollution control systems and the Noble Discoverer rig, which is owned by Noble Corp (NYSE: NE - news) and leased by Shell, when it returned from the Arctic this summer.

Shell said that “Noble Drilling, in consultation with Shell, has made the decision to dry tow the Noble Discoverer from Seward, Alaska to a shipyard in Korea”.

“The outcome of further inspections for both rigs will determine the shipyard schedule and timing of their return to service.”

Shell said it had “not made any final decision on 2013 drilling in Alaska”.

As well as the problems with the rigs, Shell’s 2013 plans could also be threatened by the outcome of a high-level review by US authorities into its 2012 campaign, and by a US Coast Guard review.

“It’s too soon to know what the outcomes of those investigations will be,” Shell said. “In the meantime, we are exploring a range of options for exploration work offshore Alaska in 2013.

“Shell remains committed to safely exploring for Alaska’s offshore energy resources.”

Greenpeace, which is fiercely opposed to Shell drilling in the Arctic, seized on the setback, claiming “the towing of both of Shell’s rusting drill rigs to Asia for repairs shows they're simply not up to the task of operating in the extreme, hostile waters of the Arctic”.

Campaigner Ben Ayliffe said: “The costs for Shell’s Arctic oil programme continue to spiral and it remains to be seen just how long investors will idly sit by and allow the company to keep pouring money down an Arctic black hole. Shell owes it to its investors to stop delaying the inevitable and pull the plug on this Arctic drilling fiasco now.”