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Latest On Royal Dutch Shell Arctic Drilling Plan

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Bidness Etc discusses when Shell can resume drilling in the Arctic and analyses the problems it faces

By: MICHEAL KAUFMANPublished: Aug 11, 2015

Royal Dutch Shell plc. (ADR) (NYSE:RDS.A) is ready to begin drilling in the Arctic. The US Bureau of Safety and Environmental Enforcement had previously banned the company from drilling at certain petroleum sites.

While the company was scheduled to begin drilling on July 30, some equipment used to control a well blowout that was being carried by a safety vessel suffered damage and was sent back for repairs, delaying the project. Shell’s experience in the Arctic has not been that great. Three years ago the company saw one of its rigs come ashore, causing damage to the environment.

Drilling in the Arctic is a debatable and divisive topic. Crude oil prices have fallen by over 50% since last summer and continue their declining trend. During Asian Trading on Tuesday, the US benchmark for crude oil, West Texas Intermediate (WTI), was down 2.38% at $43.89 per barrel, while the global benchmark for crude, Brent, was down 1.71% at $49.55 per barrel.

The declining trend has shrunk exploration and production margins for oil companies. To make matters worse, the Arctic’s rugged topography and extreme weather conditions not only add to production costs but also make operations difficult in the area.

But despite the many problems, Shell is determined to resume production in the area. Oil reserves in the area still remain untapped and Shell considers this an ideal opportunity to discover new reserves. The Arctic is said to be home to 13% of the world’s undiscovered reserves or 90 billion barrels of oil equivalent per day. In a falling crude environment, raising production is one way to offset falling crude prices.

Shell currently has two drilling rigs in the area, the Polar Pioneer and the Noble Discoverer. The oil major is also facing immense pressure from environmentalists who believe that the company is not equipped to handle the challenging environment. Part of their efforts has also forced the company not to drill simultaneously using its Noble Discoverer drilling rig. Environmentalists believe that drilling rigs simultaneously causes noise pollution that impacts polar bears and walrus populations.

Environmentalists have also expressed the importance to shift to safer alternates, with global warming increasing at an alarming pace and threatening unimaginable repercussions. With Shell resuming drilling in the Arctic, environmentalists feel that it would undermine their efforts of bringing this change.

Despite all these concerns, Shell is set to initiate drilling in the Arctic, amidst severe pressure to live up to expectations and deliver what it has promised. The company’s shares were down 0.07%during pre-market trading at $58.85.

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1 Comment on “Latest On Royal Dutch Shell Arctic Drilling Plan”

  1. #1 Ceal Smith/Chukchi Sea Watch
    on Aug 11th, 2015 at 21:41

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