Shell's Risky, Expensive Plan To Drill, Baby, Drill

A global oil glut has tanked prices and cut profits as politicians vow to confront climate change. So why is Shell drilling for "extreme oil" north of Alaska?

- Paul M. Barrett and Ben Elgin

In a windowless conference room in Anchorage, a dozen Royal Dutch Shell employees report on the highest- profile oil project in the multinational’s vast global portfolio. Warmed by mid-July temperatures, Arctic ice in the Chukchi Sea, northwest of the Alaskan mainland, is receding. Storms are easing; helicopter flights will soon resume. Underwater volcanoes—yes, volcanoes—are dormant. “That’s good news for us,” Ann Pickard, Shell’s top executive for the Arctic, whispers to a visitor.

Overhead, a bank of video monitors displays blinking green radar images of an armada of Shell vessels converging on a prospect called Burger J. Company geologists believe that beneath Burger J—70 miles offshore and 800 miles from the Anchorage command center—lie up to 15 billion barrels of oil. An additional 11 billion barrels are thought to be buried due east under the Beaufort Sea. All told, Arctic waters cover about 13 percent of the world’s undiscovered petroleum, or enough to supply the U.S. for more than a decade, according to government estimates.

Despite the July 21 meeting’s military-like precision, peculiarities become evident. Radar shows an icebreaker called MSV Fennica heading in the wrong direction—south toward Portland. Three weeks earlier, the 380-foot vessel ripped open a 39-inch-by-2-inch gash in its hull, the result of scraping against a shallow-water hazard in Dutch Harbor, Alaska. Because the multipurpose ship also carries spill response gear, the accident caused federal regulators to restrict drilling to the topmost 3,000-foot section of Burger J—and not farther down into the oil-bearing zone—until the