Shell raises arctic challenges

Reuters Business Report - Shell's rogue oil rigg, at large in Alaska, still hasn't been contained.

The Kulluk dragged two boats more than 10 miles through Arctic waters before crews cut it loose to save themselves.

It's been several days since the drillship broke free as it was towed for maintenance work, and it's not the first Arctic challenge Shell has encountered.Two other vessels have run into problems over safety concerns in recent months.

The difficulties have raised questions over whether the oil majors are ready for the unforgiving Arctic.

Environmental groups like The Wilderness Society say the likes of Shell are no "match for Alaska's weather and sea conditions."

"Shell's costly drilling experiment.... needs to be stopped by the federal government or by Shell itself," they say, "given the unacceptably high risks it poses to both humans and the environment."

But the high price of oil in recent years has made risky exploration worthwhile althoughGlada Lahn - an energy expert at the Royal Institue for International Affairs, says that could change.

GLADA LAHN, RESEARCH FELLOW, ENERGY AND DEVLEOPMENT, ROYAL INSTITUTE OF INTERNATIONAL AFFAIRS

"If you look at the lead times - the time it takes from a discovery, from the exploration to actually producing oil, it might be ten to fifteen years and the technology for instance, for transportation's changing very fast, prices might change, carbon constraints might be applied more widely, so you have the potential for the oil price to go down in future."

The risk of those stranded assets doesn't seem to worry the likes of Norway's Statoil,America's ConocoPhillips and ExxonMobil, and Italy's ENI, as well as Royal Dutch Shell.

They've all entered the race to drill where the ice caps have melted.

In Alaska alone, there's thought to be 23 billion barrels of oil - enough to easily cover the 4.5 billion dollars Shell is spending on Arctic exploration.

Some companies have joined forces with Russia's Rosneft for access to Siberia.

They're all attracted by the kudos they would get from taming a challenging environment, instead of doing deals with well known oil rich countries.

GLADA LAHN, RESEARCH FELLOW, ENERGY AND DEVLEOPMENT, ROYAL INSTITUTE OF INTERNATIONAL AFFAIRS

"Because oil companies are valued according to the reserves of oil and gas they can list on their balance sheets, they may not be incentivised to take up those offers. Were that to change, were they to be valued for instance on their technology, which is the direction we're probably moving in, then those opportunities might become more viable and more attractive."

Shell still plans to go ahead with its Arctic drilling programme this July.

Oil hasn't leaked from from the Kulluk so far but it still needs to pass the U.S regulator's tests to show it can contain one.

And it still needs to recover and repair the rig, still adrift off Alaska's shores.