Shell CFO won’t speculate on lease situation

In answers to questions during a media webcast following Shell’s announcement of its third quarter 2014 results, Simon Henry, the company’s chief financial officer, declined to speculate on what might happen if the Bureau of Safety and Environmental Enforcement turns down Shell’s request for five-year extensions to the company’s Beaufort and Chukchi Sea leases. In July Shell made the request to BSEE, citing a long list of drilling delays associated with factors such as appeals against the permits that the company needs. Some of the Beaufort Sea leases expire in 2017, while the Chukchi Sea leases expire in 2018.

Henry said that he was unable to speculate on how Shell would be situated if the lease-extension request is not granted.

Citing the impacts of the Deepwater Horizon disaster, regulatory changes since that disaster and litigation against the Department of the Interior, Henry said that Shell can justifiably claim that actions outside its control have been the prime reasons for the lack of progress in its Alaska outer continental shelf exploratory drilling.

“It’s really decisions taken down in Washington that have prevented us actually drilling to date,” Henry said.

Henry commented that 30 years ago Shell had successfully and quickly drilled several wells in the Alaska Arctic offshore and that no issues had arisen as a result of that drilling.

“It’s not that difficult to drill up there,” Henry said.

Asked about the possible impact on Shell’s capital expenditure of the company deciding not to drill offshore Alaska in 2015, Henry said that, if the company were to abandon its plan to drill, it would still incur significant cost. The drilling operations require a “small armada” of just under 30 vessels and two drilling rigs, he said. Both of the rigs and some of the equipment for the project are already committed, “so we would only save a few hundred millions,” Henry said.

- Alan Bailey