In another costly setback for Royal Dutch Shell's controversial Alaska Arctic endeavor, both drilling rigs used offshore during last year's oil exploration season will be towed out of the water on massive vessels to Asia for further inspection and repair, Shell announced Monday.
The decision suggests the Kulluk and the Noble Discoverer -- Shell's only drilling rigs for the Arctic -- need major work and calls into further question whether Shell will be able to resume drilling in the Chukchi and Beaufort seas this year. Two federal investigations are under way into Shell's Alaska operations.
In December, the Kulluk was being towed to Seattle for off-season maintenance when it repeatedly lost tow lines during a brutal Gulf of Alaska winter storm. It grounded just off Sitkalidak Island, south of Kodiak Island, on Dec. 31.
Curtis Smith, an Anchorage-based Shell spokesman, said in an email Monday evening that "the hull of the Kulluk, while stable and never in danger of sinking, also sustained damage consistent with a grounding."
It also suffered internal structural and electrical damage through the infiltration of seawater after the grounding, Smith said. Generators and other equipment were damaged and doors and windows were broken, according to the Coast Guard, Shell and others with a command team managing the grounding.
Shell has not released any detailed results of its inspection and salvage team reports following the grounding.
In July, the second drilling rig, the Noble Discoverer, dragged its anchor and nearly grounded in Dutch Harbor before the start of its drilling work. But the repair work relates to problems with its main propulsion system, not the anchor dragging incident, Smith said. The system, including the engine, may need to be replaced, he said.
With both of its Arctic rigs in need of repair, Shell hasn't made any decision on drilling this year. It must have two rigs at the ready, with one serving as a backup to drill a relief well in case of a blowout.
"Mapping the next steps for the Kulluk and the Noble Discoverer is a multi-faceted operation, and today's update is a result of those new plans being solidified," Shell said in a statement Monday.
ENVIRONMENTALISTS CALL FOR HALT
Over seven years, Shell has invested nearly $5 billion in leases, oil spill response equipment, new infrastructure, and vessels for its offshore Alaska work and said Monday it remains committed to the project. Its Chukchi Sea leases appear to contain a spectacular find with the prospect of hundreds of millions of barrels of oil, the company has said.
But environmentalists say the extent of Shell's problems in 2012 show the risk is too great and that if the government doesn't force an end to offshore drilling in the Arctic, Shell should make the call itself.
"It's time for Shell to re-evaluate whether it makes sense to continue pouring money into this complex and difficult drilling effort," Lois Epstein, the Wilderness Society's Arctic program director, said in a written statement.
Michael LeVine, Pacific senior counsel for Oceana, said Shell was unprepared for the Arctic and he called for the federal government to halt its work.
"Even if the company can somehow get its damaged vessels repaired, our government has no business allowing Shell back in the Arctic," LeVine said in an email. "Let's not forget, the damage sustained by the Kulluk was caused by poor decisions and planning."
The outcomes of various inquiries isn't yet known, Shell said. "In the meantime, we are exploring a range of options for exploration work offshore Alaska in 2013."
In progress are a Coast Guard marine casualty investigation into the grounding and a broader Department of Interior review of Shell's offshore drilling in the Alaska Arctic.
The Noble Discoverer is a converted log carrier owned and operated by Noble Corp. for Shell, and the two companies together decided to dry tow it to a shipyard in Korea, Shell said.
Shell intends for the Kulluk, which it owns, to be repaired in "a shipyard in Asia with a suitable dry dock" -- it doesn't yet know where, Smith said. Some of the biggest dry dock shipyards in the world are in Asia.
It has big vessels for the dry tows lined up, and the Noble Discoverer will leave Seward in three to six weeks for a trip across the Pacific Ocean that should take two to four weeks, Smith said.
In a dry tow, a large vessel submerges through added ballast below the draft of the rig to be towed, Smith explained. That allows the drilling rig to float over the vessel's deck, and the tow vessel is raised up, with the drill rig on its deck for the tow. It's a faster method than towing on the water.
"The outcome of further inspections for both rigs will determine the shipyard schedule and timing of their return to service," Shell said in the statement.
After the grounding, a team of responders swelled to 700 people, counting those from the Coast Guard, local and state agencies, Shell and its contractors.
The Kulluk was refloated and towed to nearby Kiliuda Bay, where it remains. Shell plans to tow the Kulluk on water to Dutch Harbor, and dry tow it from there.
The Coast Guard must approve the tow plan, which Shell hasn't yet submitted, Coast Guard Petty Officer David Mosely said Monday. The approval is only needed for the tow out of Kiliuida Bay, Smith said. The tow plan will be reviewed by the Coast Guard's Salvage Emergency Response Team of naval architects at its Washington, D.C., headquarters, Mosely said.
In November after the drilling season, the Noble Discoverer was again staging in Dutch Harbor when an engine backfired and it suffered a short-lived fire in a smokestack. Later that month in Seward, Coast Guard Capt. Paul Mehler, the Anchorage-based commander, detained it in port after inspectors found problems with safety gear and pollution prevention equipment, and crews reported a problem with its propulsion system. The detention order for the Noble Discoverer has since been lifted.
Both the Kulluk, working in the Beaufort, and the Noble Discoverer, in the Chukchi, drilled just a partial well each during a season shortened by problems with permits and equipment.
A novel oil spill containment dome that is now part of Shell's required response equipment was "crushed like a beer can" during testing near Seattle, and without it, Shell was not allowed to drill deep enough under the sea floor to reach oil-bearing layers.
In December, the Aiviq, a new $200 million ship built and run for Shell by Louisiana contractor Edison Chouest Offshore, was towing the Kulluk to Seattle for off-season maintenance when the first tow line broke and it lost power to all four engines during the Gulf storm. Tow lines then kept parting between the Kulluk and various tow vessels.
The Kulluk, a 266-foot diameter, 30-year-old circular drilling rig, had been mothballed in Canada for a dozen years before Shell bought it in 2005 for an untold sum and invested $292 million in upgrades and retrofitting.
The 514-foot-long Noble Discoverer is even older, built in 1966 and converted into a drilling ship 10 years later. It has already been upgraded and refurbished to work in the Arctic at a cost of $193 million.
The Environmental Protection Agency says both drilling rigs violated air quality standards during their work.