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Shell CEO reflects on Alaska, Chukchi Sea pullout decision
With a loss on paper of $6 billion for the third quarter attributable in part to the company’s recent pullout from Alaska, comments on the pullout decision came high on the agenda during Shell’s Oct. 29 analyst call, following the announcement of the company’s third quarter results. On Sept. 27, following exploration disappointment in the Chukchi Sea, the company had announced that it was ceasing exploration activity in offshore Alaska, thus bringing to an end the company’s multibillion-dollar Arctic outer continental shelf venture.
During the analyst call Shell CEO Ben van Beurden said that his company had drilled its Burger J exploration well in the Chukchi to target depth but that the well had turned out to be a dry hole.
“This well was (drilled) completed safely and on schedule, in probably the most regulated and high profile exploration province in the world,” van Beurden said.
Although there are other potential prospects in Shell’s Chukchi Sea leases, and in other areas offshore Alaska, Shell has decided to cease further activity in the region for the foreseeable future “due to the high cost and challenging and unpredictable regulatory environment,” van Beurden said. He commented that Shell’s Alaska leases expire between 2017 and 2020 and that the federal government has denied Shell’s request to extend the lease expiry dates.
“Shell is of the view that the U.S. government should simplify and modernize the permit process there, if there is any ambition to develop oil and gas in the offshore of Alaska,” van Beurden said.
Needed major discovery In response to a question about Shell’s Chukchi Sea program, van Beurden commented that the high expense of Alaska offshore exploration required the discovery of a significant number of barrels of oil.
“But as it turned out, this one went bad on us,” van Beurden commented, reflecting on the result of Shell’s drilling into the Burger prospect, where Shell had seen the possibility of a major oil find.
“The only good news about Alaska is that it was a very conclusive result, so at least we knew immediately what to do as a result of it,” van Beurden said.
In a more general comment on lessons learned from Shell’s recent Alaska experience, van Beurden alluded to the 2012 open water season, in which Shell drilled just the top hole sections of two wells, one in the Beaufort Sea and one in the Chukchi Sea. That season was marred by problems in deploying Shell’s oil spill containment dome, the infringement of some safety and environmental regulations and, ultimately, by the grounding of the Kulluk, the company’s Arctic floating drilling platform.
“We will have to look back and say let’s take a good view on how we got here and, without sort of rehashing the 2012 season, let’s just try and learn from this as much as possible,” van Beurden said. He also commented that much had gone well in Shell’s “exceptionally difficult” Alaska campaign.
“It would be remiss of me not to also on a call like this remind all of you how strong a performance the team there has delivered,” he said.
Greenpeace court case Meanwhile, a court case revolving around actions by environmental organization Greenpeace against Shell’s Arctic Alaska activities rumbles on. Greenpeace had appealed to the Court of Appeals for the 9th Circuit over an injunction imposed by federal District Court in Alaska, banning the environmental organization from interfering with vessels and drilling rigs involved in Shell’s Chukchi Sea exploratory drilling.
On Oct. 8 a panel of three 9th Circuit judges suggested that the case should be dismissed as moot, given Shell’s decision over its Alaska exploration. The judges instructed Shell to file any justification that it might have for continuing the case and invited Greenpeace to reply to Shell’s response.
In an Oct. 19 court filing Shell agreed that the appeal should be dismissed as moot, as from Nov. 1, the day after the court injunction is set to expire. However, Shell wants the case remanded to District Court, given that Shell still has claims against Greenpeace for the boarding of the semi-submersible drilling rig Polar Pioneer by Greenpeace activists in April 2015 and for the blockade of the icebreaker Fennica in Portland in June.
On Oct. 28 Greenpeace responded to Shell’s statement by arguing that the appeal in the 9th Circuit is not moot because Shell still has a claim in District Court against Greenpeace as a consequence of the Portland protest. A contempt of court order in District Court, upon which Shell’s District Court claim relies, relates to the District Court injunction that is the subject of the 9th Circuit appeal, Greenpeace said. Thus, the injunction, and with it the appeal, cannot be declared moot until the District Court claim has been settled, Greenpeace argued.
- Alan Bailey
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