Shell's US Arctic oil drilling starts, stops

Arctic waters are believed to be home to significant oil reserves, prompting Royal Dutch Shell PLC this week to start drilling the first new oil well in U.S. Arctic waters in more than 20 years -- but encroaching sea ice forced the drill ship off the site just a day later.

Despite its remote location and harsh climate, the Arctic is relatively rich in energy and mineral resources.  U.S. Arctic drilling occurred in the twentieth century, but no new wells have been drilled in the last two decades.  Shifting trends, including relatively high oil prices and a warmer Arctic climate (as evidenced by this summer's record low sea ice coverage in the Arctic), have increased the pressure on oil companies to expand Arctic production.

For the past six years, Shell committed about $4.5 billion to exploration for oil and gas reserves under the Outer Continental Shelf off Alaska.  Shell believes the region may host the largest untapped oil-bearing formation in the U.S., perhaps holding about 26 billion barrels of oil.  Environmental lawsuits and concerns over how any oil spill could be responded to have delayed Shell's drilling plans, but last month Shell obtained a permit from the federal Bureau of Safety and Environmental Enforcement to start preliminary drilling activities.  While the BSEE has not yet certified Shell's oil spill response barge, the preliminary permits allow the company to begin drilling pilot holes.

Last Sunday, crews aboard the Noble Discoverer began drilling at a site known as the "Burger" prospect in the Chukchi Sea about 70 miles off the Alaskan coast.  (Shell posted a Youtube video of the drill bit entering the water.) 

But even in a low-ice year, the Arctic climate is forbidding.  Yesterday, drilling stopped as sea ice approached the Noble Discoverer.  Reports indicated that a pack of ice about 12 miles wide, 30 miles long and up to 82 feet thick was about 105 miles away from the drill ship and drifting closer.  It may take several days for this ice pack to pass.

According to Shell, the Noble Discoverer will resume drilling once the ice moves on.  As the Arctic winter approaches, more and more ice should form in the Chukchi Sea.  Will Shell find the oil it expects?  Can it produce the oil safely in the icy Arctic?