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Seven years and £3bn later...

London - Shell is preparing to re-assess its Arctic drilling plans in the light of the latest setback in a trouble-strewn exploration campaign that has cost £3bn but produced no oil.

The Anglo-Dutch firm’s seven-year programme suffered a major blow on New Year’s Eve when its drilling ship Kulluk ran aground off the Alaskan coast during a violent storm.

Royal Dutch Shell incident commander Sean Churchfield briefs reporters on the status of salvage operations for the Shell drill ship Kulluk at a press conference. Credit: AP

Industry sources with knowledge of Shell’s plans said it was now ready to reconsider whether it should continue drilling in the Arctic Circle once the stricken Kulluk, built in 1983, has been righted.

One insider said the question of whether to press on with Arctic development would “have to be addressed as and when”.

Although Shell said there were “no signs of environmental impact”, the accident extends a list of problems that has forced executives to question the wisdom of expensive Arctic drilling.

Efforts to extract oil from the region have cost around £3bn to date and any production is still years away.

Shell will also have to bear the cost of efforts to pull the Kulluk free from its grounded position and prevent any fuel from escaping into the pristine waters.

The mounting cost of Shell’s Arctic campaign is matched by the reputational damage caused by successive operational setbacks that have stoked fears about environmental safety. Earlier this year the company said it had damaged a “capping stack” – the key piece of equipment used to plug an oil spill – during testing.

Greenpeace accused the company of spending too little time testing the stack.

Successive delays have prevented Shell from drilling any exploratory wells during the short summer window when the melting of sea ice makes it possible. In a brief statement, Shell insisted that the Kulluk running aground was ‘a maritime transit incident and not a drilling incident’.

It is thought to have been caused when a tug towing the Kulluk suffered an engine failure, causing cables connecting it to the drilling ship to come loose.

Shell has already begun a technical review to see what it can learn from the incident, which took place in extremely bad weather.

A team of salvage experts boarded the Kulluk yesterday to assess the damage and options for pulling the vessel free from its position.

The rescue operation is being managed from the Unified Command Centre in Anchorage, which includes Shell staff as well as the US Coastguard and employees from energy firm Noble which operates the drilling ship for Shell. - Daily Mail

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