Shell's US Arctic Policy an 'Ongoing Gamble': Greenpeace Analysis

MarineLink.com
Wednesday, March 05, 2014
Image courtesy of Greenpeace

The analysis considers that the US Arctic Ocean presents almost a perfect storm of risks: a requirement for a long-term capital-intensive investment for uncertain return; a remote and uniquely challenging operating environment; ongoing court challenges; a lack of extraction and spill response infrastructure; and the spotlight of the world’s environmental organisations, the US political community and international media. Greenpeace provide the following summary of the document:

Royal Dutch Shell stands at a strategic crossroads. Its response to the reserves scandal in 2004 has been a global reserves replacement hunt through a programme of relentless capital expenditure. This search included an investment in US Arctic Ocean leases in the mid-2000s that dwarfed other companies’ spending.

Shell’s US offshore Arctic plans have been a failure despite capital expenditure, to date, in excess of $5bn. Following a 2012 drilling season beset by multiple operational failings and a subsequent ‘pause’ in the company’s Arctic programme, Shell announced, on 30 January 2014, a forced reversal of its intention to return to the Chukchi Sea in the summer of 2014.

The main factor cited by Shell for its decision to pause its offshore Arctic drilling programme yet again was a decision by the US Court of Appeals for the Ninth Circuit. On 22 January 2014, the court found in favour of Alaska Native and conservation organisations in their challenge to the environmental analysis underlying the US government’s decision to sell leases, including those owned by Shell, in the Chukchi Sea. The plaintiffs have sought to have the leases invalidated. Even if that does not occur, it is likely that the government will be forced to carry out a new environmental analysis, which could delay Shell’s exploration in the Chukchi Sea by several years.

Investors in IOCs are increasingly questioning allocation of shareholder capital to high cost, high risk projects such as offshore Arctic drilling against an industry backdrop of flat share prices and declining returns on equity even through a period of sustained $100/barrel oil prices.2 Shell’s January 2014 profit warning –  the company’s first in 10 years – was attributed in part to “high exploration costs”.3 Despite increasingly vocal shareholder calls for greater capital discipline, Shell remains committed, at least publicly, to the high cost, high risk US Arctic Ocean.

Significant concerns remain regarding Shell’s preparedness and capabilities for responding to a major incident. In reviewing the company’s 2014 exploration plan and operating plan, one of the relevant regulatory agencies, the Bureau of Ocean Energy Management (BOEM), raised a number of significant questions. Several of these queries relate to contractor oversight – the source of many of the problems that arose in 2012 and an unwelcome echo of the root causes of the Deepwater Horizon disaster. Shell’s response to these questions and its public statements do not evidence serious recognition of the problems in 2012 or a concerted effort to improve.

As Ben Van Beurden, the new CEO of Shell, prepares to deliver his vision for the future of the company and to set its strategic priorities, he and investors must carefully balance any focus on reserves replacement ratio with the potential financial impact of the short and long-term risks inherent in any project.

The US Arctic Ocean presents almost a perfect storm of risks [mentioned above] In this context, investors must scrutinise Shell’s assessment of such risks and the company’s ability to mitigate and manage them in order to determine whether the potential return provides sufficient justification to continue. Questions for investors to ask Shell on these issues are suggested at the end of each chapter and brought together in the conclusion of the document.

FROZEN FUTURE 'Shell’s ongoing gamble in the US Arctic' can be downloaded at: http://bit.ly/1ibJ3dp

 

 

Maritime Reporter June 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Gondan to Build Spanish Patrol Boats

Gondan Shipyard has recently signed a contract with the Guardia Civil, Spain’s Civil Guard, for the building of two patrol boats. The aluminum and fiber (PRFV ) vessels will measure 20.

ABS to Class the World's First CNG Ship

ABS announced it has been chosen to class the world's first compressed natural gas (CNG) carrier ordered by Pelayaran Bahtera Adhiguna, a subsidiary of Indonesia's

Interview: Roberto Cazzulo Talks Class Trends

As Roberto P. Cazzulo, RINA, steps down as the Chairman of the IACS Council, Maritime Reporter caught up with him to discuss the current state and future direction of global class.

Environmental

Desulfurization of Exhaust Gases in Shipping

Are shipowners prepared to enter SECA zones?   Due to existing regulations on air exhaust emissions from the International Maritime Organization (IMO), and with

Valemon Topsides Installed

On Monday, July 28, the topsides were lifted into place on the steel jacket on the Valemon field in the North Sea. Produced by Samsung Heavy Industries this is

Tripoli Airport Ablaze, Rockets Leave Libya in Chaos

Diplomats flee Libyan chaos; Politicians appeal for international intervention. Clashes in Tripoli, Benghazi kill around 160 over two weeks, while Libyan capital face fuel, power shortages.

Arctic Operations

Study: An Arctic Oil Well Blowout Could Spread More Than 1,000km

Oil from a spill or oil well blowout in the Arctic waters of Canada's Beaufort Sea could easily become trapped in sea ice and potentially spread more than 1,000 kilometres to the west coast of Alaska,

House Subcommittee Hearing Highlights “Dismal State” of U.S. Icebreaking Capability

At the July 23, 2014, hearing of the House Subcommittee on Coast Guard and Maritime Transportation on “Implementing U.S. Policy in the Arctic” the committee chairman, Rep.

GTT Wins DSME Order for 9 More Icebreaking LNGCs

Gaztransport & Technigaz (GTT), a designer of membrane containment systems for the maritime transportation and storage of Liquefied Natural Gas (LNG), announced

Offshore Energy

Prelude By the Numbers

Out at sea, look! It’s a ship! It’s a floating rig! It’s SuperFLNG! While not “faster than a speeding bullet,” Shell’s shipzilla Prelude is certainly more powerful than a speeding locomotive,

FLNG Prelude: A New Dawn in the Age of Maritime & Energy

Longer than four football fields, as big as six Nimitz-class aircraft carriers and almost as tall as the Taipei 101 skyscraper, Royal Dutch Shell PLC is hoping that its record-setting,

Corvus Energy, GMC Close Financing Agreement

Corvus Energy today announced that it has completed a strategic investment by Green Marine Capital (GMC) previously announced on May 5, 2014. Green Marine Capital,

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Standards Naval Architecture Offshore Oil Pipelines Ship Repair Ship Simulators Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2666 sec (4 req/sec)