Shell announced Thursday that it plans to drill offshore in the Chukchi Sea, between Alaska and Siberia, thereby putting to use billions of dollars worth of leases after years of problems and uncertainty, according to the Alaska Dispatch News. The project will cost the Dutch oil giant nearly a billion dollars, mostly in various permits and the costs of keeping a fleet in such a remote location. Shell bought the Chukchi leases in 2008 but has yet to drill.
The decision comes on the heels of a string of setbacks for Shell and oil production in Alaska: Global oil prices are plunging, drilling contractor Noble Drilling was found guilty of committing various environmental and safety violations last year, and Shell’s Kulluk drill rig ran aground last year. At this point in 2014, Shell had abandoned its six-year effort to drill in the Chukchi region and remained uncertain about pursuing oil there even last month. Shell CEO Ben van Beurden told the Alaska Dispatch News that to make drilling profitable, Shell will have to make a major discovery or oil prices will have to change.
Shell’s Arctic endeavors come at a contentious time for energy development in the region, with the Obama administration recently protecting parts of the Alaska National Wildlife Refuge and now making additional areas of the Chukchi and Beaufort Seas off-limits to drilling. Alaska leaders have been critical of Obama’s efforts to seek what his administration call a “balanced” energy production policy in the state—particularly of his decision to ban oil and gas drilling in Bristol Bay.
“It’s a one-two-three kick to the gut of Alaska’s economy,” Senator Lisa Murkowski told the Alaska Dispatch News.
The Department of the Interior recently released a draft of its five-year program for offshore oil and gas leasing. It plans to make available nearly 80 percent of estimated oil resources in the region, but none in the Chukchi and Beaufort Seas areas, which were already off-limits under previous leasing plans. Shell’s lease is situated just outside the protected zone.