Shell Looks to Lengthen Arctic Drilling Season Amid Deadlines

WASHINGTON - Royal Dutch Shell PLC is scrambling to take advantage of a shrinking opportunity to drill for oil in the Arctic Ocean this summer, recently asking the Obama administration to allow it to get an early start on planned wells there, people familiar with the issue said.

With about three months left before winter ice is expected to move in, Shell is waiting for construction of an oil-spill containment vessel to be completed and for the ship to make its way north to the waters off Alaska's coast. Shell can't begin work on wells in the Chukchi and Beaufort Seas until the vessel is in place.

Facing a race against time, Shell officials met with the Obama administration last week and asked for permission to do prep work without the vessel in place, people familiar with the meeting said. The administration, however, wasn't keen on the idea and Shell isn't banking on permission being granted.

Now, Shell is welcoming the ability to drill later than looming deadlines outlined by the Interior Department, people familiar with the situation said.

Shell has to wrap up drilling for oil in the Chukchi Sea by September 24 and in the Beaufort Sea by the end of October. The deadlines create a buffer of time during which Shell can respond to potential oil spills before ice moves in. Ice is still prevalant in areas where Shell wants to drill this summer, but the company believes it will be gone by the first week of August.

"No matter what our timing ends up to be, we're going to make the most of time we do have," Shell spokesman Curtis Smith said.

Shell's struggle to make the most of the 2012 Arctic drilling season is the latest challenge in what has become one of the most-politically charged oil-drilling operations in U.S. waters.

Shell has spent more than $4 billion buying leases and equipment to drill in the Arctic, becoming the first company in several years to explore for oil there.

"The limited time makes it harder for Shell to actually drill to depth, but the most important thing is that Shell demonstrate they can have a safe season and be allowed to come back," said Robert Dillon, a spokesman for Sen. Lisa Murkowski, a Republican from Alaska and a vocal supporter of energy production in the state.

Environmental groups, worried about spills and potential damage to a sensitive ecosystem, have tried to block Shell every step of the way. Several groups contested air-quality permits granted to the company by federal regulators and have sued over the legality of the leases the company holds.

The Obama administration has been forced to balance the need for safe drilling, especially in the wake of the 2010 Deepwater Horizon spill, with the desire to promote domestic oil production. An oil discovery off the coast of Alaska could help President Barack Obama tout his energy policies in an election year.

The Interior Department wasn't available for comment.

Shell's oil-spill containment vessel, the Arctic Challenger, is docked in Washington state and is undergoing construction. Once the vessel leaves Washington, it will take about 14 days to get into place. Shell's Smith said he didn't know when construction work would be completed.

Copyright (c) 2012 Dow Jones & Company, Inc.

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