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| FEATURE: Oil prices seen as a minor factor in Shell's 2015 Arctic decision |
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| News Source：http://www.jinchemical.com/
; SendDate：2014-12-19 14:42:34 |
By March, Shell is expected to announce if it will go forward with plans to drill for oil in Arctic waters offshore Alaska in 2015, a decision which may have more to do with the outcome of court cases and US government reviews than global market fundamentals, sources said this week.
While one industry analyst said he "seriously doubted" the company would pursue Arctic drilling due to the that current steep decline in global oil prices, both officials with Shell and environmental opponents said price may be a minor factor in the company's 2015 decision on Arctic drilling. This is due to the expected lengthy lag between the start of a possible drilling program and production.
But Shell's 2015 decision is widely seen as a potential turning point for the company's long-range Arctic plans, with billions already spent and rival companies putting their own Arctic drilling plans on hold. It is increasingly likely that if Shell does not pursue drilling offshore Alaska in 2015, they may choose to abandon the region indefinitely, according to Michael LeVine, the Pacific Senior Counsel of Oceana, a leading critic of Arctic drilling.
"The company's hold in the Arctic appears to be growing increasingly tenuous," LeVine said in an interview.
ConocoPhillips and Statoil have both put an indefinite hold on their own Arctic drilling plans, and Chevron told Canadian regulators this week that it was also indefinitely suspending its own Arctic drilling plans.
Shell officials have given no indication of whether the company plans to pursue US Arctic drilling, but have indicated the decision may hinge on decisions currently before federal courts and the Obama administration. Any unforeseen delay or adverse decision could doom Shell's 2015 drilling plans offshore Alaska, and, potentially, any future plans there, company officials have said.
"In regards to future activity offshore Alaska, we continue to take a methodical approach to a potential future drilling program," said Curtis Smith, a Shell spokesman, in a statement.
During an October 30 earnings call, Shell CFO Simon Henry said that while the company was "planning and hoping" to drill offshore Alaska in 2015, the decision to do so would depend on ongoing litigation against the US government and pending federal regulatory permits.
"We need to see progress on a number of fronts," Smith said, pointing to a court approval of a draft Supplemental Environmental Impact Statement, or SEIS, which is currently open to public comment, as well as necessary permits Shell has yet to receive.
"And, of course, we have to have total confidence that we can execute a program safely and responsibly," Smith said.
A day after Shell's earnings call, the US Bureau of Ocean Energy Management released its draft SEIS for oil development in the Chukchi Sea, the result of a second US District Court ruling that the agency had to correct flaws in environmental studies ahead of the 2008 Arctic lease sale. The updated study, which raises the estimate of potentially recoverable crude oil from Arctic leases from 1 billion to 4.3 billion barrels and increases the chances of a large spill in Arctic waters, has yet to be finalized.
It also remains unclear if the SEIS will be accepted by the 9th US Circuit Court of Appeals, complicating Shell's ability to make a decision on offshore drilling.
The decision is further complicated by another pending 9th Circuit decision, this time on a lawsuit filed in 2012 challenging the US Bureau of Safety and Environmental Enforcement's approval of Shell's oil spill response plans. Last month, the court threw out a Shell lawsuit which sought validation of BSEE's approval of the oil spill plans, an attempt to prevent legal challenges from environmental groups.
At the same time, BOEM has yet to approve Shell's exploration plan, which outlines plans to use two drill vessels to drill up to six wells over several years in the Chukchi. The agency has yet to give any indication of when that decision could be made.
Also, BSEE has given no indication that it will give Shell a five-year extension on its Arctic leases which it said it needed before Shell invests hundreds of millions of dollars on its Arctic drilling plans, which have already cost the company roughly $6 billion, according to a July letter from Peter Slaiby, a Shell vice president.
Nick Pardi, a BSEE spokesman, said the agency has no timeline for a decision on Shell's extension request.
Shell's leases in the Chukchi are expected to expire in 2020, while many of the company's leases in the Beaufort, which the company acquired in 2005 and 2007 lease sales, will expire in 2017.
In addition, Shell's 2015 Arctic plans could be thwarted by federal permits for drilling, particularly Endangered Species Act and Marine Protection Act permits, which could be delayed or denied.
And the court and government approval timelines may not give Shell enough time to mobilize vessels, environmental sources said.
"Rushing to make important choices and complete important analyses serves no one well," said LeVine. "The best course for the government and Shell is to proceed with caution."
Environmentalists stressed this week that Shell's own ill-fated attempts at Arctic exploratory drilling in 2012, which included a series of accidents, would likely be the biggest deterrent to the launch of an Arctic drilling program in 2015.
"Given the mishaps by Shell in 2012, Shell's competency is a major factor in what happens in 2015," said Gwen Dobbs, a spokeswoman for the Alaska Wilderness League.
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