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Shell scales back 2012 Arctic drilling goals

Published: Saturday, July 28 2012 9:00 a.m. MDT

In this photo taken Monday June 25, 2012 near Bellingham, Wash., and released by Shell Alaska, members of Shell’s well delivery group, along with representatives from the Bureau of Safety and Environmental Enforcement witnessed the deployment of the capping stack that will join Shell’s Alaska drilling fleet. The device looks like a giant spark plug. It's designed to kill a blowout by providing a metal-to-metal seal on a busted blowout preventer. Its successful deployment 200 feet below the water meant Shell passed another requirement for drilling exploratory wells in Arctic waters for the first time in more than two decades.  (Shell Alaska, Associated Press) In this photo taken Monday June 25, 2012 near Bellingham, Wash., and released by Shell Alaska, members of Shell’s well delivery group, along with representatives from the Bureau of Safety and Environmental Enforcement witnessed the deployment of the capping stack that will join Shell’s Alaska drilling fleet. The device looks like a giant spark plug. It's designed to kill a blowout by providing a metal-to-metal seal on a busted blowout preventer. Its successful deployment 200 feet below the water meant Shell passed another requirement for drilling exploratory wells in Arctic waters for the first time in more than two decades. (Shell Alaska, Associated Press)

Our take: With global oil demand expected to rise in the long term, and conventional production in decline, international and national fuel companies have turned increasingly to more challenging exploration and production.

Faced with iced-in Arctic waters and failure to secure U.S. Coast Guard approval of its oil-spill barge, Royal Dutch Shell is ratcheting down its plan to drill as many as five exploratory wells this summer in the seas north of Alaska.

The company planned to sink the wells in the Chukchi and Beaufort seas during a brief window between July and October, when the waters were expected to be clear of severe ice. But Pete Slaiby, Shell’s vice president for Alaska operations, said it’s unlikely the company will be able to meet that goal due to regulatory challenges and stubborn ice.

“We are still hopeful that we will get some wells drilled,” Slaiby said. “Considering what we’ve been through . . . I think doing any kind of drilling will be a success.”

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