Drilling for oil in the Arctic – is it literally crazy? Because it is driving some of the biggest companies in the world to exhibit what can only be described as irrational behaviour. The end of easily accessible oil from conventional sources is leading international oil companies (IOCs) to consider ever more extreme forms of oil and gas extraction – with the Arctic Ocean being among the last frontiers.
In addition to the increasing inaccessibility of conventional oil and gas reserves, IOCs face a threat from the rise of “resource sovereignty” in Latin America, the Middle East and Russia – where not surprisingly, governments are increasingly asserting control over the natural resources located in their territories. In the case of Russia, IOCs have entered a number of joint ventures with Russian national oil and gas companies, Rosneft and Gazprom. BP has also become Rosneft’s largest independent shareholder. These alliances aim to trade western capital along with technical capability and expertise for access to oil and gas concessions in the Russian Arctic and continental shelf.
In 2012, Shell made a mess of their attempts to drill in the Chukchi Sea . The multiple operational snafus and the company's failure to meet US regulatory requirements served as a warning about just how risky it is to drill for oil and gas in the Arctic.[i] Shell's experience in the Alaskan Arctic has had a knock on effect - for now at least, both ConocoPhillips and Statoil have shelved plans for drilling in the far north. However, at the same time, yet more alliances with Russian companies are being announced.
These alliances expose IOCs and their shareholders (including pension fund members and even council tax payers) to enormous risks. These include poor environmental and safety performance, questionable corporate governance, an unpredictable political, legal and economic regime and a serious lack of corporate transparency. One example leaps out: The Kolskaya rig, hired by Gazprom subsidiary Gazflot, capsized and sank on its way back from drilling in the Okhotsk Sea on 18 December 2011, killing 53 of the 67 crew.
Greenpeace, in collaboration with Platform and ShareAction, has published a report examining and exposing these risks, leaving investors with some tough questions to ask – and the companies like Shell almost certainly unable to answer them.
Read the investor briefing: Russian roulette: International oil company risk in the Russian Arctic
Read the full report: Russian roulette: International oil company risk in the Russian Arctic
[i] See FairPensions, Greenpeace, and Platform 2013 ‘Repeated Misadventures: Key questions for Shell on its Alaskan Arctic programme’.