Two days later, Tillerson and Igor Sechin took part in a videoconference to sell the deal to analysts who gathered at the St. Regis hotel in New York. Sechin was uncharacteristically rhapsodic in his presentation. The announcement of the deal alone, Sechin said, had added $7 billion to the combined value of the two companies. Points for vision! “Experts say that this project, in terms of its ambitions, exceeds sending man into outer space or flying to the moon,” he crowed.
Reuters summed up the news like this: “The deal is likely to prove transformational for Exxon.”
Pause briefly to smile, Rex.
The oil and natural gas stashes north of the Arctic Circle, according to the U.S. Geological Survey’s first-ever publicly available assessment of the area in 2008, “account for about 22 percent of the undiscovered, technically recoverable resources in the world. The Arctic accounts for about 13 percent of the world’s undiscovered oil, 30 percent of the undiscovered natural gas, and 20 percent of the undiscovered natural gas liquids.” A lot of that potential hydrocarbon haul—maybe most of it—resided in Russian territory. But it wasn’t going to be easy to get, or to deliver to world markets. Not without a lot of help.
What the Russians brought to the oil and gas game north of the Arctic Circle in 2012 was sheer brute force. Which was much needed. Almost any maritime operation in the Arctic promised a punishing battle against the harshest nature can offer. The Northern Sea Route from Murmansk, Russia (up near the northern coast of Finland), through the Barents Sea, the Kara Sea, the East Siberian Sea, the Chukchi Sea, and out through the Bering Strait was navigable only a few months a year because of ice. The increasing ice melt caused by climate change was easing the way, but even in the annual midsummer-to-early-autumn thaw, passage required massive self-propelled sea plows to clear a path in places. Russia had done the hard work to solve this problem back in the last innings of the Soviet era, having started construction on four separate nuclear-powered icebreakers. When completed, two of the ships had not one but two nuclear reactors on board. These were ships of hulk and ingenuity—able to cut through layers of ice eight feet deep at a speed of ten knots, equipped with a superstructure that included commodious living quarters, recreation areas, and an enormous indoor winter garden for providing fresh vegetables to the crew. Anywhere. Anytime.
A quarter century later, those four Soviet-era seafaring plows were still in operation and formed the backbone of the most able and impressive fleet of icebreakers in the world. No other country had the maritime brawn to match. The U.S. government, by comparison, had constructed only two serviceable heavy icebreakers back in the 1970s. And then pretty much stopped. The U.S. Coast Guard’s Polar Star, already well past its thirty-year life expectancy, was wheezing away on a refurbished but highly suspect electrical system; its sister ship, Polar Sea, was sitting lifeless at its home berth in Seattle. The Polar Sea had been dead towed there in 2010 after five of its six engines failed. The finest repair and modernization experts at Vigor Marine had been unable to bring her back to life. The ship’s main continuing utility was in allowing its parts to be cannibalized to maybe keep the dying Polar Star afloat a bit longer.
Americans like to think the dueling-superpower thing ended conclusively with the Cold War, with the United States now the undisputed winner in every conceivable matchup between the two countries. But in ice water? Turns out Russia still ruled. In 2011, a tanker chartered by Russia, the STI Heritage, made the quickest Northern Sea Route run of that year—just eight days—with two nuclear-powered, fresh-vegetable-producing icebreakers clearing the way. Russian-escorted tankers filled with tens of thousands of tons of iron, jet fuel, and gas condensate had made the Arctic transit more than thirty times that year. The Russian Federation was already writing big checks to manufacture four even larger and more powerful icebreakers to lead the fleet. Three of them double-reactor nuclear. Which meant the Russians would be able to plow out to offshore Arctic drilling sites and to deliver crude oil and liquid natural gas from that icy domain to almost any country in the world, for years to come.
But here was the problem: despite its unrivaled ice-busting prowess, Russia didn’t bring much to the actual offshore drilling operations in the frozen north. Russian companies, for instance, offered little in the way of useful drilling rigs or equipment of any kind—not even basics like subsea wellheads. In 2012, having made Russia’s economy and its power in the world almost entirely dependent on oil and gas, Putin faced a serious conundrum: his ability to maintain Russia’s place as an “energy superpower” depended almost entirely on availing himself of the expertise and technology of major Western oil companies. Russia had oil companies, sure, but they were gangster economy creations, and not one of them was technically or even financially competent. To do something difficult when it came to oil and gas production, Putin’s pet crocodile Igor Sechin was going to be no help. It would have to be ExxonMobil. BP. Chevron. Shell.
They all wanted in, of course. The potential profits were ginormous. But success in the Russian Arctic would require overcoming two very difficult challenges. First, some Western oil major would have to figure out the proper care and feeding of Vladimir Putin, given the desperately high stakes of oil and gas for his presidency. Look at the ashes of Yukos; look at the chewed-up remains that Putin and Sechin spit out from what used to be BP’s “joint venture” in the country. This was going to be a delicate thing. What Western company would be willing to put itself in service to the Russian government, in service to Putin? Whose shareholders, whose home country, would stand for it? Which executives could stomach making that kind of arrangement?
And then there was the second difficult prospect for this potential partnership. No one much liked to talk about it. But, um, were the Western oil majors actually capable of drilling up in the Arctic? They said they were, but could they really do it? Good news for President Putin in 2012, he was about to get a true measure of the West’s state-of-the-art Arctic offshore drilling operation. Such as it was.
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Royal Dutch Shell in particular was an operation worth watching that spring. The company owned more offshore drilling leases in the Beaufort and Chukchi Seas off the northern coast of Alaska than anyone, having paid $2.1 billion for the rights to drill there back in 2008. By the beginning of 2010, the company had invested close to $4 billion in its Arctic exploration program and was champing at the bit to start drilling.
But as Shell’s permits were wending through the final approval process that year, the epically disastrous Deepwater Horizon blowout in the Gulf of Mexico prompted Obama’s Department of the Interior to hit pause on all offshore drilling applications. The president of Shell scrambled to keep hope alive. “I want to acknowledge the tragedy of the Gulf of Mexico blowout and oil spill. I commend the Department of Interior (DOI) for its role in coordinating the unprecedented joint industry-government response effort.” The letter was sent to a key DOI official less than three weeks into the unfolding disaster, while tens of thousands of barrels of oil were spilling into the Gulf of Mexico each day. The spewing was just getting started, but Shell’s president, Marvin E. Odum, wanted it front of mind at Interior that his company was still “committed to undertaking a safe and environmentally responsible exploration program in the Chukchi Sea and Beaufort Sea in 2010.” Hint, hint, tick tock. He reminded the deciders at Interior that the waters in Alaska were much shallower than in the Gulf of Mexico; that his wells in Alaska would not be drilled nearly as deep as Deepwater Horizon; that Shell would have another rig on-site to quickly drill a relief well in the case of a blowout. They’d have plenty of dispersants on hand, too, and most crucially a “pre-fabricated” and “pre-staged” containment dome in waters nearby. “We have already begun to enhance our operational excellence in light of [the Deepwater Horizon] incident and we will continuously make adjustments as new learnings are revealed.”
But the prolonged drama of Deepwat
er Horizon—nearly five months to seal the well for good, and only after almost five million barrels of oil flooded into the Gulf of Mexico—was too much to overcome. Shell had to cool its operationally excellent jets while the 2010 and then the 2011 drilling seasons passed. Since it couldn’t drill during that time, Shell focused its operational excellence instead on its paperwork, which—it must be said—was demonstrably enhanced during that time-out.
The drilling application Shell filed for the 2012 season was its finest ever. The Oil Spill Response Plan alone ran more than four hundred pages and incorporated the latest in best practices, thanks to all those Deepwater Horizon learnings. Relief wells and government-approved dispersants were all the rage. Shell had them. Containment dome was a must. Shell had it. And the Obama administration seemed to be buying what Shell was selling. Secretary of the Interior Ken Salazar noted in public statements that the seas in the Arctic drilling region were, in fact, much shallower than in the Gulf of Mexico and that he trusted Shell professionals when they said they could trap and contain all but about 10 percent of any spill. “I believe there will not be an oil spill,” Salazar said in 2012. “If there is, I think the response capability is there to arrest the problem very quickly and minimize damage.” Shell’s capabilities, Interior insisted, had been borne out by drills, inspections, and “tabletop exercises.” It was left unsaid whether these “tabletop exercises” involved scale models of the industry’s only proven oil spill cleanup tool, which was still basically just paper towels.
Stands to reason that there would be some magical thinking going on in 2012. There was a president who needed reelecting, which every armchair political scientist knew would be made more difficult if American commuters and vacationers were screaming mad about the highest gasoline prices in history. Obama had hit the GOP on high gas prices, and to great effect, in the 2008 campaign season. But the high price of gas in 2012 was on Obama’s watch. And in 2012, it was worse even than the previous summer’s record highs. The Obama administration was careful not to invoke “Drill, baby, drill,” but it was not going to be seen standing in the way of any new energy sources. Not in an election year. Wind, solar, the spoils of fracking, Arctic oil and gas, it was all on the tabletop. “Alaska’s energy resources—onshore and offshore, conventional and renewable—hold great promise and economic opportunity for the people of Alaska and across the nation,” said Salazar.
Still, the Obamanauts were cautious and kept invoking their insistence that good science rule decisions. Official permission for Shell to drill in federal waters in the Alaskan Arctic rolled out slowly in the first months of 2012 and was in no way final. There were a lot of contingencies to the approval, like making sure all the components of Shell’s promised oil spill response program were available on-site. Shell bosses appeared confident they could pull it off. Hell, with crude oil prices back up over $100 a barrel, the company was actually increasing its ambitions in the Arctic. Shell filed updated plans to drill four wells in the Beaufort Sea off Alaska’s remote north shore, and another six in the little-explored Chukchi Sea just west of Beaufort.
But time was of the essence. Even factoring in increasing ice melt caused by climate change, there was still a very narrow window of reasonable weather north of the Arctic Circle. Encroaching ice would close off safe operations around November 1. The Department of the Interior’s newfound caution, meanwhile, narrowed Shell’s window for drilling even further. The company would need to finish up drilling about five weeks before that date, Interior insisted, so that any oil spill response could be performed in open water, before the seas froze over. The Coast Guard’s moribund Polar Sea was not going to be coming to anybody’s rescue. That meant Shell had to cease drilling “into known hydrocarbon zones” by September 24. The company could noodle around out there until about Halloween, but not anywhere it might hit oil or gas. This was a race, and it loomed as an epic test of man against nature. Shell pronounced itself ready for the task.
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When the first of Shell’s twenty-one-vessel flotilla pulled out of Puget Sound and headed north for Alaska in the last week of June 2012, Seattle’s seagoing community looked on with excitement and pride. “I think there will be huge opportunities for seafarers out here,” said Carl Ellis, assistant dean of the Seattle Maritime Academy. “The industry in the Gulf is finally coming back, and we’re going to see the same thing in a microcosm in the Arctic.” The prized ornaments of the fleet were two fresh-painted blue and white drillships, both of which had been refurbished by the pros at Vigor. Shell could certainly have afforded to build brand-new, state-of-the-art drillships for this mighty endeavor. But it chose to go the more, shall we say, economical route. Why spend extra money to protect a $4 billion investment? In a region that might produce oil and gas for forty or fifty years? Let’s go with used. But let’s really trick ’em out. Vigor had spent nearly a year upgrading Shell’s cone-shaped, 266-foot-by-230-foot Kulluk. The company had retrofitted all the Kulluk’s waste systems, for instance, to ensure that there would be exactly zero discharge of liquids from the rig into the pristine Arctic seas. No oil, no diesel fuel, no sewage, no sink water. No nothing. “Everything down to the smallest detail is centered on protecting the environment,” Vigor’s senior director of ship repair said as the fleet motored away. “Ensuring safety at all levels was our primary focus.” The Vigor company website boasted, “Even the blue and white paint scheme was chosen to accommodate the preferences of whales.” This was news on a few fronts. Not the least that whales had color preferences. The Kulluk was also newly equipped with what Marine Log magazine called a “bird avoidance system,” though it is hard to imagine how exactly this gargantuan, buoy-like rig—a propeller-less, twenty-eight-thousand-ton mobile offshore drilling unit—could make a controlled feint around an eagle or two. Still, it did sound good. Bang-up paperwork.
The second drillship in the Alaska-bound flotilla was the Discoverer, which Shell had contracted from the Noble Corporation. Unlike the Kulluk, which had to be towed north by an ice-class tugboat, the Discoverer cruised out to sea on its own power. The Discoverer was a kind of maritime version of the Little Engine That Could. Known affectionately by its 124-person crew as “the Disco,” the vessel was an underdog with an unprepossessing backstory—and by nautical standards, a pretty long one. The Disco was the second-oldest drillship at sea. The vessel was built in Japan in 1966 and launched as the Matsushiro Maru; it began life as a bulk carrier with the unromantic duty of hauling wood from North America to Asia. Converted into a drillship in New Orleans way back in 1976, by 2010 the Disco seemed to be limping toward the salvage yard (and—spoiler alert!—it would be there soon). It did sport a handsome, newly installed main drill rig at midships that year, but everything else on board was dicey. A second mate who served briefly on the Disco in 2010 was horrified at its condition. “Parts of it below decks looked like Swiss cheese,” she wrote. “NOT good!” The main engine wouldn’t start, and it was so old the ship’s mechanics were hard-pressed to find replacement parts. If you turned on the fire pump, it spit water into a giant maw that formed a “swimming pool” that rose from the bilge to the main deck. Nobody seemed to know exactly why, or to be much concerned about it, according to the second mate. She resigned her post after just three weeks.
But Shell had faith in the Disco. In 2011, in anticipation of its upcoming Arctic adventure, Shell dispatched the creaky, forty-five-year-old ship on a shakedown operation in the relatively calm waters off the coast of New Zealand. It shook down, all right. It just didn’t shake down too good. A quick series of modest New Zealand storms that April knocked the Disco cockeyed. Its anchor lines snapped. Some of its drilling equipment dislodged and sank to the ocean floor. “The veteran drillship was so badly damaged,” wrote a reporter from the Taranaki Daily News as he looked at the idle vessel all lit up in the waters just beyond the port, “that it will be unable to return to drilling operations any time soon
.” Noble and Shell kept the faith, though, and were determined to make the Disco seaworthy once again. Even Arctic seaworthy. They hired Vigor Marine to make it so. But then came the fricking superheroes.
On the day before the Disco was due to head from Taranaki to Vigor’s shipyard in Seattle in February 2012, eight environmental activists—including Lucy Lawless, the actress who played Xena, Warrior Princess—managed to sneak aboard and scale the 175-foot-high drilling tower, festooning it with banners reading “Stop Shell” and “SaveTheArctic.” The activists refused to come down off the tower. They had brought food enough for a week. Environmentalists, as a rule, try to eat light. Taranaki police boarded the ship to effect arrests, but the protesters told the local gendarmes they were not going anywhere. Xena and her fellow eco-warriors said they had a moral obligation to keep the Disco from its next appointment. “Deep-sea oil drilling is bad enough, but venturing into the Arctic, one of the most magical places on the planet, is going too far,” Lawless told the gathered press. “I don’t want my kids to grow up in a world without these extraordinary places intact.”
The protesters did eventually disembark, but the to-do made the Disco almost a week late in getting to its rejuvenation berth at Vigor Marine in Seattle, at a time when every day counted. Vigor had already assembled a team of more than five hundred to hasten the upgrades necessary to make the Disco ready for drilling the Alaskan Arctic. The crew scrambled to complete its work, which would generally take six months. They got it done in just ten weeks. The ship was newly winterized, its hull reinforced to do battle with Arctic ice. The long-in-the-tooth vessel now had six engines that not only started but were equipped with twenty-foot-high catalytic converter equivalents that made the Disco’s carbon emissions somewhere between negligible and nonexistent. And all the work was completed on time! “It is impossible to overstate the pride Vigor Marine teams have felt working on these critical rigs,” a company spokesman reiterated as the flotilla disappeared over the horizon and churned north toward its great Arctic challenge.
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