A drillship damaged off the coast of Alaska two weeks ago may jeopardize Royal Dutch Shell PLC's plans for additional exploration in the Arctic this year.

Shortly before New Year's Eve, the Kulluk drillship broke free from the tugboat pulling it to Seattle for maintenance and crashed into an uninhabited island near Anchorage, Alaska. The rig was stuck in the rocks for nearly a week until Shell managed to haul it to Kodiak Island's Kiliuda Bay for assessment.

According to Shell, the rig's hull did not appear to be breached, although the ship lost its electric generators and incurred water damage.

If the rig cannot be repaired before Arctic drilling season starts this summer, Shell's $4.5 billion Arctic Ocean drilling program may reach an impasse. Finding a replacement would be unlikely, as there are only three Arctic-class drilling rigs in the world.

The crash may also reflect on Shell's safety standards. The Interior Department began a high-level review of Shell's accidents in pursuing drilling in the Arctic Ocean. Environmentalists have called for a halt to issuing drilling permits in the Arctic, arguing that the area's volatile weather increases the risk of spills.

"This is a setback for Shell and raises concerns about drilling safety in harsh environment and could galvanize opposition," said Fadel Gheit, senior energy analyst at Oppenheimer & Co. "Shell and the industry must do a better job" (Lefebvre/Sider, Wall Street Journal, Jan. 14). -- BS