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

People & Company News

MN 100: Gencorp Insurance Group

The Company: Gencorp Insurance Group provides the Insurance and Surety needs of Marine Contractors, Vessel Operators and Shipyards throughout the country and Caribbean.

MN 100: Bordelon Marine

The Company: Founded in 1979, Bordelon Marine is a leading provider of Marine Transportation services operating in the Gulf of Mexico and around the world. The

MN 100: Bouchard Transportation

The Company: Bouchard Transportation’s history dates back to its incorporation in 1918 by founder, Capt. Fred Bouchard, the youngest tugboat captain in the Port of New York.

Environmental

Panama Canal Suspends Draft Restriction

The Panama Canal Authority (ACP) has lifted scheduled vessel draft restrictions brought on by lingering draught conditions in the region.   The ACP had previously set restrictions of 11.

Exhaust Gas Scrubber Guide Updated

An updated version of the “Exhaust Gas Cleaning Systems Selection Guide” is now available, the U.S. Maritime Administration (MARAD) announced today.   Developed

Tropical Storm Erika Heads for Florida

Tropical Storm Erika lashed Puerto Rico and the Virgin Islands with heavy rain and fierce winds on Friday, moving across the Caribbean and apparently heading for the Dominican Republic,

Arctic Operations

Wärtsilä Scrubbers for Finnlines Vessels

Finnlines, a Ro-Ro and passenger vessel operator with services in the North and Baltic Seas, has contracted Wärtsilä to supply three vessels with exhaust cleaning scrubber systems.

Yamal LNG Arctic Project in Doldrums

The massive $27 billion Yamal LNG liquefied-natural-gas venture in the Arctic Circle, a centerpiece of President Vladimir Putin’s plan for Russia has been squeezed by U.

US Navy Sub Completes Arctic Deployment

Fast-attack submarine USS Seawolf (SSN 21) returned to its homeport of Naval Base Kitsap-Bremerton August 21, following a six-month Arctic deployment during which

Offshore Energy

MN 100: Bordelon Marine

The Company: Founded in 1979, Bordelon Marine is a leading provider of Marine Transportation services operating in the Gulf of Mexico and around the world. The

Yamal LNG Arctic Project in Doldrums

The massive $27 billion Yamal LNG liquefied-natural-gas venture in the Arctic Circle, a centerpiece of President Vladimir Putin’s plan for Russia has been squeezed by U.

MHI, SBG Invest in Wind Energy Startup Altaeros Energies

Mitsubishi Heavy Industries, Ltd. ("MHI") and the Suhail Bahwan Group ("SBG") have invested in Altaeros Energies, a Massachusetts-based technology company, to

 
 
Maritime Careers / Shipboard Positions Navigation Offshore Oil Pipelines Salvage Ship Electronics Ship Repair Ship Simulators Sonar Winch
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: 0.2010 sec (5 req/sec)