Shell Resigns the Arctic

Royal Dutch Shell’s conical drilling unit Kulluk. Credit: (Reuters / Zachary Painter) / Reuters

Last week, Royal Dutch Shell announced that it had terminated its oil exploration and drilling in the Arctic, a retreat welcomed by environmentalists who had been working diligently against the project from before its licensing by the Bush Administration and further permitting by President Obama, even after Shell had demonstrated its incompetence by allowing its rig to break free from tow to run aground and thereafter to have one of the accompanying private contract icebreakers hit a reef, tearing a hole in its hull and requiring its return to port for repairs.

Greenpeace and many other environmental and ocean conservation organizations, including the World Ocean Observatory, have been arguing for the past two years or longer against the logic of the project and the certain devastation should anything go awry in that most distant place under those most difficult conditions. You may remember photographs of kayakers in Seattle, Washington, and protesters hanging from a bridge in Portland, Oregon, attempting to impede the progress of the drilling platform for repairs and return to the licensed area.

In the meantime, the U.S. Coast Guard, the federal agency responsible for emergency and environmental response, asserted that it did not have the capacity to react to a life-threatening emergency, technical failure and cleanup to environmental conditions caused by a spill. That the project lasted this long defies any notion of corporate planning, responsibility, or decisiveness. The cost to the Shell shareholders is estimated to have run in excess of US$7 billion (source). This event leaves only two companies still active in the Arctic: BP in Prudhoe Bay and Russia’s Gazprom exploratory platform in the Pechora Sea.

England’s Guardian newspaper has provided very focused and informative reporting of this saga, and in a September 28th article by Arthur Neslen, included a number or revealing quotes by the parties involved. According to Neslen, Shell publicly blames “disappointed exploratory results, high operating costs, and strict US environmental regulations for its decision to quit” after such an enormous investment. He quotes a company source who added. “We were acutely aware of the reputational element to this programme.”

Reputation indeed. That did not seem a concern as the company doubled down before on its resolve in the face of both protest and logical risk analysis of drilling in such a vulnerable and dangerous place. Nor did the other excuses of lesser results, costs, and regulation make much difference in the justification to the public and to shareholders as legitimate reason not go ahead with the project.

In my view, from the beginning, this project has been a classic expression of corporate and executive hubris, a belief by Shell that the opening of the Arctic was desirable and inevitable and its relations with the US government precluded the intervention and requirements demanded by the opposition. Shell executives appeared certain and unassailable, even as one wondered why the shareholders would extend their trust and support in what seemed a marginal enterprise at the outset and today a significant loss of both funds and face.

The Guardian article quotes Shell VP for Media Relations, Andy Norman’s glib shifting of the conversation from failure to opportunity, citing the company’s “attractive acreage” off Brazil and in the Gulf of Mexico, projects while perhaps somewhat less challenging, remain nonetheless dangerous and expensive, in a time when oil prices are very low, other energy companies are shutting down operations and laying off employees.

This is a great step forward for the protection of the Arctic from this kind of exploitation. Unlike Antarctica, the polar north is deemed more open to development of many different sorts, and governance of this area is complicated and conflicted. World Ocean Radio will be attending the Arctic Circle meetings in Reykjavik, Iceland, this month to understand the issues better, meet experts from many nations with different perspectives and interests, and to produce a new World Ocean Forum web-based conversation on the issues as a microcosm of the many aspects of ocean capacity and sustainability to be considered.

Shell may go on to other projects, continue to shift their productivity to gas, and even to explore at long last alternatives such as solar and wind energy that represent the obvious long term business strategy for any company that intends to survive. The age of oil will be over soon, and it may be that this failure represents a turning point that will abandon short-term profit and oil-saturated thinking for a new paradigm to the benefit of us all.

***

PETER NEILL is founder and director of the World Ocean Observatory, a web-based place of exchange for information and educational services about the health of the world ocean, providing links and proactive services to individuals, aquariums, science centers, educational institutions, governmental and non-governmental organizations to build public awareness and a global constituency for the ocean. “Shell Resigns the Arctic” was originally published as an audio podcast on WORLD OCEAN RADIO.

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.