US Gulf spill clouds Shell’s Alaska drilling plans

* MMS seeks more data on safety plans

* Shell investments total $3.5 bln in region

* Environmental groups seek to delay drilling

By Yereth Rosen

ANCHORAGE, Alaska, May 13 (BestGrowthStock) – The oil drilling
disaster at a BP Plc (BP.L: ) well in the Gulf of Mexico has cast
doubt on Royal Dutch Shell’s (RDSa.L: ) plans to drill for oil
thousands of miles away in the Arctic Ocean.

U.S. regulators, under mounting criticism for oversight of
the oil industry, are seeking new information about Shell’s
plans in frontier waters off Alaska, and environmental groups are trying to block new drilling in the region.

Shell says it still plans to drill up to five wells this
year in Alaska, an ambitious program years in the making.

“We’re still moving forward,” spokesman Curtis Smith said.

Shell has invested about $3.5 billion since 2005 on its
plan to turn Alaska’s lightly explored outer continental shelf
into a major oil-producing province. The basins have potential
to hold a combined 24 billion barrels of recoverable oil,
according to Interior Department estimates.

The U.S. Minerals Management Service, which months ago gave
preliminary approval to Shell’s Alaska drilling plans, now
wants the company to take more safety steps in response to the
explosion at Transocean’s Deepwater Horizon rig that BP hired.

Shell has until Tuesday to respond to a letter sent last
week from MMS Director Elizabeth Birnbaum seeking “detailed
information on additional safety measures that the company is
proposing to undertake in light of the Deepwater Horizon
disaster.”

Shell plans to drill about 75 miles offshore in the Chukchi
Sea, the often ice-choked expanse between Alaska and Siberia,
and the Beaufort sea several miles off Alaska’s north coast.

The company expects to begin moving a drilling rig from the
Philippines to Alaska within weeks, and some support vessels
may be sent north even sooner, Smith said.

“But obviously we’re not going to fully mobilize them
unless we know that we’re going to have a drilling program this
year,” he said.

Shell had planned to start drilling in the Beaufort as
early as 2007, but legal challenges delayed that program.

SAFER THAN BP PROGRAM?

Smith said Shell’s Chukchi and Beaufort Sea drilling
programs were safer than BP’s Gulf of Mexico projects, noting
that Shell’s prospects lie in 150 feet of water, far shallower
than the 5,000 feet the Deepwater Horizon was working in.

The underwater and reservoir pressures encountered at BP’s
Gulf well site are three to five times more than those at the
Shell-targeted sites, he said.

The Alaska areas are shallow enough to be reached by human
divers should a problem emerge, while BP has been forced to use
robotic devices at the ruined well site, he said.

But environmentalists say Arctic offshore drilling poses
special risks, including remoteness and limited ice-free
seasons.

“We don’t believe that they have the capacity to respond to
a blowout the magnitude of that in the Gulf,” said Marilyn
Heiman, U.S. Arctic program director for the Pew Environmental
Group. She noted that at the Inupiat Eskimo village of
Wainwright, one of Shell’s proposed designated spill-response
centers, “there’s a boat ramp, not even a boat dock.”

Stan Senner, director of conservation science for the Ocean
Conservancy, said the Gulf spill demonstrates the need for a
“time-out” to reevaluate offshore Arctic drilling.

The Center for Biological Diversity sent notice last week
that it is preparing a lawsuit against the Interior Department
seeking to block Shell’s Beaufort and Chukchi drilling, citing
alleged oil-spill risks to polar bears, a threatened species.

ConocoPhillips (COP.N: ) has plans to drilling in the Chukchi
as early as 2012. Norway’s StatOil (STL.OL: ), which entered a
partnership with ConocoPhillips, also holds leases, as do
Italy’s ENI (ENI.MI: ) and Spain’s Repsol (REP.MC: ).

Stock Market Investing

(Editing by David Gregorio)

US Gulf spill clouds Shell’s Alaska drilling plans