Royal Dutch Shell announced it would withdraw from the Arctic after finding insufficient oil and gas at its well to justify further exploration. The company’s announcement comes as the declining price of oil has forced a halt on more and more big exploration projects. The New York Times,
“The Alaska operations have cost billions of dollars. Shell said the value of Alaska drilling on its balance sheet was $3.1 billion and that it had a further $1.1 billion in contractual commitments, probably for items like drilling rigs. The company said it would take write-offs as a result of the decision to halt drilling.
“‘Shell continues to see important exploration potential’ in offshore Alaska, Marvin E. Odum, president of Shell Oil, said in a statement. ‘However, this is clearly a disappointing outcome.’
“Energy experts have expressed skepticism about the economics of Arctic drilling for some time.
“‘The number of special challenges, unforeseen things you have to deal with, long supply chains, just make it very difficult to have the same level of confidence around costs as you do for development elsewhere,’ said Andrew Slaughter, executive director of the Deloitte Center for Energy Solutions.”
The reason for Shell’s exit has everything to do with the company’s balance book. Drilling for oil in the Artic is not—at least at this point in time—worth the costs. According to the company, that includes the cost of the project itself and the cost of dealing with an unpredictable regulatory environment. So, Shell decided to withdraw. The company has not ruled out all future exploration in the region.
As could be expected, Seattle City Council members Kshama Sawant and Mike O’Brien celebrated Shell’s exit. The two were pictured high-fiving one another at the start of Monday’s council meeting.
Councilmember Sawant stated during the council briefing, “Shell has decided to do this because it’s not economic for them … They are also saying that if oil prices rise again, they will try again because it will make economic sense…They have already spent $7 billion of our economy’s wealth on this. I would ask everybody to imagine how differently $7 billion could be used if we spent it on renewable energy.”
Though there are some troubling aspects of Sawant’s statement—companies have the right to invest resources as they choose—at least she understands why Shell decided to withdraw. The same cannot be said of Councilmember O’Brien who joined extreme “green” activists’ failed attempt to block a Shell oil rig on its way to the Artic by paddling his ironically plastic kayak out in Elliot Bay.
O’Brien said, “Shell abandoned ship today ‘for the foreseeable future,’ both claiming that it failed to find enough oil to make further drilling worthwhile and citing an unpredictable regulatory environment. This about-face from big oil is really a big win for those of us who spoke out against Shell’s Arctic drilling plans and called for a just transition from our current fossil fuel dependence.
“From the beginning I have said life as we know it depends on bold, immediate action, especially when a harbinger of catastrophic climate change is moored in our backyard. The people of Seattle, the mayor, and the Seattle council were resolute in our opposition to Shell’s presence in our city and it’s pursuits in the Arctic. I firmly believe that our actions, in combination with #ShellNo activism in Seattle and across the country, created the regulatory uncertainty Shell hinted at today.”
O’Brien’s explanation as to why Shell decided to withdraw from the Artic is, simply put, delusional. A group of “kayaktivists” paddling plastic kayaks that were made using oil did not scare off a multi-billion dollar oil company. Shell’s decision has everything to do with cost analysis, not an unknown hastag used by extreme greenies.