Shell resumes Arctic drilling but cuts $15bn from global investment

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January 29, 2015 by Bill Johnson


Shell tanker and refineryRoyal Dutch Shell is reviving plans to drill for oil in Arctic in a move likely to intensify its battle with environmentalists.

The Anglo-Dutch giant’s chief executive Ben van Beurden accepted that Arctic drilling “divides society”, but said the world needs new sources of oil.

Greenpeace said Shell was taking a “massive risk” in a “pristine” region.

Shell also announced a $15bn (£9.9bn) cut in global spending, and profit figures that disappointed investors.

The cut in investment – spread over three years – comes after a fall in the oil price. Although the price is expected to remain lower in the medium term, Mr van Beurden said: “We are taking a prudent approach here and we must be careful not to over-react to the recent fall in oil prices.

“Shell is taking structured decisions to balance growth and returns.”

Shell also said profits for the last three months of 2014 had risen to $4.2bn compared with $2.2bn in the same period a year earlier.

The numbers were below analysts’ forecasts, prompting a big sell-off of Shell’s shares, down almost 5% in early afternoon trading.

‘Responsibly’
Shell put its Arctic plans on hold two years ago after a drilling vessel ran aground and legal wrangles in the US.

The company has already spent $1bn on preparing its drilling work in Alaska’s Chukchi Sea. It was costing Shell several hundred millions of dollars a year to keep the existing operations ticking over, the company said.

Mr van Beurden said there were still issues to resolve before drilling began, such as over operating permits and getting further facilities in place. But he hoped to see work begin in the summer.

“We will only do this if we feel that we can do it responsibly,” Mr van Beurden told the BBC. “I think that we are as well prepared as any company can be to mitigate the risks.”

He also pointed out that there are already other energy companies operating in the Arctic.

Mr van Beurden said that the world needs new sources of oil and gas to meet demand and that the Arctic offered potentially the biggest resource base ever found.

Estimates have put the estimates at some 24bn barrels in Alaska.

Environmentalists have campaigned against Shell for years. Greenpeace’s Charlie Kronick, said: “Despite announcing cuts [in global investment], Shell hasn’t taken the opportunity to cut its most high-cost high-risk project.

“Shell is taking a massive risk doggedly chasing oil in the Arctic, not just with shareholder value, but with the pristine Arctic environment.

“A spill there will be environmentally and financially catastrophic. It’s time for investors to recognise that it’s impossible for Shell to justify its continued pursuit of offshore Arctic oil.”

Read more: Shell resumes Arctic drilling but cuts $15bn from global investment

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