Shell's Arctic drilling could impact plans for Canada's Beaufort Sea

Companies proposing to drill in Canadian Arctic waters will be closely watching Shell's drilling program in the Chukchi sea off the coast of Alaska, after Shell received final approval to drill two exploratory wells on Monday.

In order to obtain approval to drill the wells — Shell's first in Arctic waters in over two decades — the United States government required the company to bring in a capping stack, a roughly 10-metre well capping device that can be lowered over a wellhead to stop a blowout. The Bureau of Safety and Environmental Enforcement required Shell to have the device ready to use within 24 hours of a blowout.

The effectiveness of Shell's equipment could have major consequences on potential drilling on the Canadian side of the border, according to energy analyst Doug Matthews.

"We will have to wait and see if this equipment can really function in the Arctic," he said. "I think there's two possibilities. 

"If Shell can show that it can safely drill in the Chukchi sea, which is a high bar for them given their past experience in the Arctic, but if the company can show that it is possible to drill safely and properly in the Arctic, that could give a lift to exploration in the Canadian Beaufort.

"If, on the other hand, Shell repeats some of the difficulties of the past... I think it could put a real damper on exploration in the Beaufort"

Matthews is referring to a series of issues in the Arctic suffered by Shell that included losing control of the Kulluk oil rig in 2012. In that case, Coast Guard divers had to rescue 18 crew members.

Given their issues, then, why does Matthews believe Shell's moving forward with their Arctic drilling program while companies in the Beaufort, such as Imperial Oil and BP, have theirs on hold?

"Shell's running out of oil," he said.

Beaufort presents own challenges

The Beaufort Sea also presents challenges of its own, said Matthews. In particular, the proposed drilling area is much further offshore than Shell's proposed site in the Chukchi — about 200 kilometres to Shell's 100 — and significantly deeper.

"Our challenge is deeper water combined with a much deeper drilling program," he said. "It's a much harsher water environment for the Canadian Beaufort than it is for the Chukchi."

The deeper the program, the harder it will be for companies to drill a same season relief well, which is a requirement for drilling in both the United States in Canada.

However, Imperial Oil has said that given the short drilling season, such a well isn't possible in the Beaufort. The National Energy Board has agreed to review alternatives to same season relief wells. Imperial Oil says it's researching alternative safety measures, but hasn't yet presented a plan.