Royal Dutch Shell has announced that it plans to commence its planned drilling in the Arctic this year. The news is likely to further affect its reputation with environmental groups.
The company’s CEO, Ben van Beurden, has said that he accepts that society will remain divided over Arctic drilling, but he believes that the world is in greater need of new oil sources. The company has already announced a cut of £9.9 billion in its global investment plan, following profit reports that concerned investors.
The three-year reduction in investment has followed the oil price drop. Although this is expected to be sustained in the medium term, Shell has confirmed its intention to be prudent in its approach rather than ‘over-reacting’ to short-term price volatility. Q4 profits last year rose to $4.2 billion, compare favourably with the same period in 2013, when profits were posted at $2.2 billion. The figures didn’t meet investor expectations, however, which prompted a 5pc dip in Shell’s share price.
Shell has spent over one billion dollars in preparatory work for drilling in the Chukchi Sea. The work required simply to maintain the operation was costing the business millions of dollars annually.
Van Beurden has confirmed that issues still need to be resolved in advance of the drilling, including the build of additional facilities and the acquisition of necessary operating permits. The plan is to begin drilling in the summer, but only if Shell feels that it can be begun ‘responsibly’ and with risks adequately mitigated.
Shell has also flagged up that a series of other oil companies are drilling in the Arctic. Mr van Beurden believes that the Arctic offers the largest base of hydrocarbons yet and could be sufficient to meet increasing levels of demand. Some experts believe that there may be up to 24 billion barrels of oil yet to be recovered in Alaska.