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Why Royal Dutch Shell plc Is Facing Resistance In Canada

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By: MICHEAL KAUFMAN: Aug 28, 2015 

Royal Dutch Shell plc’s (ADR) (NYSE:RDS.A) drilling in Canada will be coming in for resistance, as reported by the Guardian. The drilling plan in Nova Scotia’s southern shore has been approved by the country’s Environment Minister and is under the Canada-Nova Scotia Offshore Petroleum Board’s review.

The Canadian Environment Ministry has been criticized for not for reviewing strategic projects properly and for disregarding public opinion. People are not happy with Environment Minister’s decision to allow 21 days to cap any oil spill, when in the US, only 24 hours are allowed.

The company is planning to cut its capital expenditure (capex) and excess capacity by using equipment from Norway and not buying new one. Around 50,000 Canadians have signed the petition against Shell’s drilling in Nova Scotia, and it would be in Board’s best interests to keep its biases away from the decision and scrutinize the project closely.

Currently, oil producers are under immense pressure as oil prices are continually declining. Oil giants including Exxon Mobil Corporation (NYSE:XOM), Shell, and BP plc (ADR) (NYSE:BP) have posted poor results in the second quarter with expectations that the third quarter will also not be impressive.

Companies are reducing their capital expenditure, laying off employees and are adopting more cost saving measures. Shell is already facing strong criticism for its Arctic drilling, and if resistance from the Canadian public continues or the Board’s decision goes against Shell’s drilling, the company will suffer even further. Shell’s image is at stake and if these projects do not work out, the company will be in deep trouble.

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