Shell stopped drilling in the Arctic, this is why
Shell has surprised the world, ceasing the oil exploration in the Chukchi Sea above Alaska.
The decision was announced last Monday at 7 am: the last day of the exploration permit in the Arctic.
The decision has been made by 3 arguments:
- very disappointing results of exploratory drilling
- low oil prices
- ‘uncertainties’ from future governments and lawmakers
The last two sound the most convincing. The first argument ain’t. What’s going on?
Disappointing results of the exploration?
Since the summer, Shell summited that the investigation in Alaska delivered little. But only a couple of months is a very short period to base these firm conclusions. Till now, Shell has always said that the investments in the Arctic were made for the long term. It was planning several years for research. It has made reservations for one billion: money for buying out contracts for materials and subcontractors that are already reserved for the job.
What about the low oil prices?
The current oil price is less than $ 50 per barrel. More than 10 dollars lower than is required for short-term investments. At Shell, every ten dollars per barrel price drop, is costing the company $ 3.3 billion. Taking into account other costly projects, like the acquisition of the British gas company BG, the low oil price probably plays an important role.
What does Shell mean with an unpredictable government?
The press release speaks of a “challenging and unpredictable federal law environment” around the oil drilling. But so far, Shell received all the necessary permits, although the tough opposition from local environmental groups and Greenpeace. The risks are at a higher level. Last August, presidential candidate Hillary Clinton revealed to be a declared opponent of the project.
— Hillary Clinton(@ HillaryClinton)
“he Arctic is a unique treasure. Given what we know, it’s not worth the risk of drilling. -H
Which arguments have not been mentioned by Shell?
Last year, two social movements pressured on Shell to say goodbye to the Polar Adventure:
- the environmental movements and critical thinkers like Greenpeace and BetterWorldSolutions
- major shareholders like Lego and pension investment fund ABP (a Dutch major investor in Shell)
Many pension funds are struggling with their green image and have been under pressure to reverse their investments in fossil fuels in favor of renewable investments. This is partly the result of years of action by opinion leaders and environmental groups in the (energy) world. The world is confirmed in their equal with this Shell decision.
Shell’s dirty energy projects in the Arctic and in Alberta’s tar sands have already tarnished a green image that it carefully crafted over several years. The firm has set a $40 a tonne internal price on carbon, and lobbied for higher EU carbon prices to fund the development of its carbon capture and storage technologies.
- Shell is playing with fire in pool area in Alaska
- Lego ends Shell partnership
- BP pays record environmental fine of 18.7 billion for oil spill in 2010
- Shell will pay for cleaning up polluted Niger Delta
- Shell is going to drill in the Arctic
- Shell will get a green light for drilling in Alaska
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