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 April 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

BIMCO Welcomes EU Decision on Migrants

BIMCO has stated today that it appreciates the new efforts by EU leaders to reduce increasing reliance on merchant shipping to rescue the growing numbers of

Long Beach, Los Angeles ports host forum to gather input

More than 100 cargo owners, trucking firm leaders, longshore labor, marine terminals and other goods movement industry representatives turned out Wednesday for

Arctic Nations to Fight Climate Change Despite Russia Tensions

The eight Arctic Council nations pledged on Friday to do more to combat climate change that is shrinking the vast frigid region, with countries trying to put

Environmental

IMO Calls for Environmentally Sound Ship Recycling in Bangladesh

The  International Maritime Organization (IMO) and the government of the People’s Republic of Bangladesh are jointly implementing a project entitled “Safe and

BIMCO Welcomes EU Decision on Migrants

BIMCO has stated today that it appreciates the new efforts by EU leaders to reduce increasing reliance on merchant shipping to rescue the growing numbers of

Long Beach, Los Angeles ports host forum to gather input

More than 100 cargo owners, trucking firm leaders, longshore labor, marine terminals and other goods movement industry representatives turned out Wednesday for

Arctic Operations

Goliat FPSO in Norway

The Goliat FPSO was successfully floated off the heavy-lift vessel, Dockwise Vanguard, in the fjord outside Hammerfest, says Eni Norge    The Goliat platform has arrived in Hammerfest,

Arctic Nations to Fight Climate Change Despite Russia Tensions

The eight Arctic Council nations pledged on Friday to do more to combat climate change that is shrinking the vast frigid region, with countries trying to put

Rolls-Royce to Power Ice-class MPV

Rolls-Royce informs it has secured a contract to supply a power and propulsion package for an ice-class multipurpose vessel under construction at Keppel Singmarine

Offshore Energy

Falklands' Oil Drilling at Isobel Deep Suspended

Oil explorers drilling in the waters north of the Falkland Islands have suspended work on the second well of their 2015 current six-well drilling campaign after a technical problem.

Four Petrobras Platforms Halt Output Due to Oil Leak

Four Petrobras oil platforms off the northeast coast of Brazil have halted production after a leak of about 7,000 liters of oil was detected coming from a pipeline linking them,

Huat Retires as Non-Ex Dir. of ST Engineering

Singapore Technologies Engineering Ltd (ST Engineering) today announced the retirement of Mr Quek Poh Huat as non-executive Director of the Company at its Annual General Meeting on 23 April 2015.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Naval Architecture Navigation Port Authority Ship Electronics Ship Simulators Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | 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: 0.2304 sec (4 req/sec)