This summer, after six years of planning to drill in the Alaskan Arctic, Shell finally moved into the region in a failed first attempt at drilling for oil. To date, Shell has spent $4.5 billion on Alaskan Arctic offshore drilling. This includes the cost of licenses and permits to drill off the coast of Alaska.
Yet in spite of the time and money invested, this summer produced only frustration for Shell, as it encountered problems with its equipment, with the American regulatory authorities, and almost inevitably with the Arctic itself in the form of dangerously unpredictable ice.
Ice delayed Shell from reaching the site in early July, in spite of assurance from chief executive Jorma Ollila at this year's annual general meeting that the site would be ice free during operation the summer. Shell had to suspend operations after only 36 hours of drilling, as a 30-mile by 12-mile block of ice was blown towards the drill site.
These were only part of the problems Shell faced. Others included:
- the drill ship slipping anchor in the sheltered waters of Dutch Harbour;
- the failure to receive vital environmental performance and emissions certification for the oil spill containment barge;
- and the failure to test adequately the oil spill capping device in realistic conditions, which was previously damaged while being deployed in the relatively benign waters of Puget Sound, several thousand miles south of the Arctic waters where it would need to be used.
Shell’s summer was a catalogue of mishaps, poor planning and poor performance.
We’ve prepared a new briefing for investors, summarising the problems facing the company this summer, building on our earlier report Out in the Cold and highlighting new risks to shareholder value. Shell hasn’t answered the questions raised before they arrived to drill in the Arctic this year, and their performance this summer has raised still more.