SHELL Update

It appears that it may be the end of the road for SHELL’s fantasy to engage in exploratory drilling in the Chukchi and Beaufort seas – at least for this season. With mishap after mishap for the flotilla heading north through the Bering Sea, then finally making it to Dutch Harbor just to wait out the storm promulgated by stubborn sea ice, it appears that it is not Mother Nature that has thrown a rig wrench into this blunder, but a man-made disaster. Even the courts couldn’t put a kibosh on the “Green Light” to proceed to drill where no man has drilled before, but a stupid mix-up may be the spike in the heart. The environmental groups and Native Alaskans that were adamant that this was bad business, they should be celebrating. No longer is it a rumor that the fuel tanks aboard the Noble Discoverer and the escort fleet have shown unacceptable levels of sulfur – above the limits of the current EPA permit. And since the EPA has not released any “Press Releases” over this latest set-back for Tony the Tiger, or is it the Dinosaur, that silence is almost like a stamp of approval that it’s over! This $2-Billion dollar blunder may be the straw that breaks the camel’s back and may send SHELL packing for good. So who’s to blame? How about the State of Alaska! See, the fuel that was supposed to be used called for a sulfur content less than 15 parts-per-million. Forget about the math, it boils down to the fact that the fuel – thousands of gallons – is not fit for the mission. And most likely the case stands that the EPA will not or should not even entertain a “conditional waiver” over this fiasco in efforts to let SHELL slide by and continue with what appears to be a drilling season already cut way too short - just no time left to bother and disrupt tranquility. And since the EPA has already allowed an amended permit to SHELL, the fact that a high sulfur diesel could wreck havoc the existing hi-tech environmental equipment aboard the fleet makes it almost impossible to move forward this risky venture – unless SHELL was capable of removing, cleaning and finding an acceptable fuel source. But not this far north and time is critical. It won’t happen, no matter how much loot is in that wallet. And since a “Concerned Citizen” has already filed an “Environmental Crime” with the EPA, it trumps what may have been considered a way forward and places the EPA on guard. Basically, the “crime” is a priority and must be addressed before any options. Once again, who’s to blame? Yes, the State of Alaska may be the culprit that has succeeded in making many environmentalists very happy. The fuel was supposedly purchased along the way from a supplier down in Nikiski. It was supposed to be “Ultra-Low” sulfur diesel fuel. It wasn’t. And since this state has been trashed with respect to “regulations”, it is very possible that since the “regulators” are missing in action, that the fuels being supplied throughout this state to meet EPA air quality demands may not be meeting such mandates. And when no oversight comes along and clashes with oversight required, like in SHELL’s permit case, well tests don’t lie. So today we see a man-made disaster that has sunk SHELL’s plan to be the 1^st kid on the block to drill for the “black gold” in an inhospitable place, where only the mighty can still to this day claim as a home. Good riddance SHELL. Hey, maybe when you turn around and head south you can off-load all that crappy fuel along the way, to the villages that have spent $millions$ defending their homeland against “Invaders”, just to soften the blow.

Shell Shocked

SHELL Exploration & Production may be forced to forfeit this year’s attempt to drill exploration wells on the Outer Continental Shelf in the Beaufort & Chukchi seas, due to a fuels contamination problem discovered today aboard its Noble Discoverer Drillship and a similar problem aboard other support vessels scheduled to begin the OCS drilling program next week. This mishap most likely occurred from cross-contamination when the drillship and escort ships’ fuel tanks were filled from various sources along the route from Seattle to the Arctic Ocean. The EPA limit approved by the “Permit to Construct” issued to SHELL limits the sulfur content to less than 15ppm. Recent tests results from a 3^rd party testing lab, a requirement of the permit, indicated a cross-contamination level exceeding 25ppm. Due to this contaminated diesel fuel with higher than normal sulfur content, operating out-of-specifications could damage the technologies designed into the ship’s environmental air quality degradation equipment and used in efforts for the EPA permitting process.  Because of the latter fact, a waiver from the EPA would be an  impossibility at this stage as this mishap has consequences beyond a simple deviation of the permit, with the application of an addendum. The only other option at this late stage in the controversial drilling game would be an exchange of fuel that meets the “permit” criteria.  But to find a convenient place to off load the diesel fuel then purge the tanks of the high-sulfur constituents, it would take time, thus limiting the time available for this year’s drilling season, already shortened due to stubborn ice shows. More to come on this latest set-back for SHELL E&P.