• 3 minutes Nucelar Deal Is Dead? Iran Distances Itself Further From ND, Alarming Russia And France
  • 5 minutes Don Jr. Tweets name Ukraine Whistleblower, Eric Ciaramella. Worked for CIA during Obama Administration, Hold over to Trump National Security Counsel under Gen McCallister, more . . . .
  • 9 minutes Shale pioneer Chesepeak will file bankruptcy soon. FINALLY ! The consolidation begins
  • 12 minutes China's Blueprint For Global Power
  • 6 mins Pioneer's Sheffield in Doghouse. Oil upset his bragging about Shale hurt prices. Now on campaign to lower expectations, prop up price.
  • 1 hour Tesla Launches Faster Third Generation Supercharger
  • 19 mins Passerby doused with flammable liquid and set on fire by peaceful protesters
  • 8 hours Who writes this stuff? "Crude Prices Swing Between Gains, Losses"
  • 10 hours EU has already lost the Trump vs. EU Trade War
  • 8 hours China's Renewables Boom Hits the Wall
  • 6 hours Climate Change Consensus Shifts in Wind, But Gas Is Still the Right Move
  • 13 hours Atty General Barr likely subpeona so called whistleblower and "leaker" Eric Ciaramella
  • 12 hours Joe Biden, his son Hunter Biden, Ukraine Oil & Gas exploration company Burisma, and 2020 U.S. election shenanigans
  • 17 hours Iran's Master Plan?
  • 15 hours Iran Finds New Oil Field With Over 50 Billion Barrels: Rouhani
  • 11 hours Does .001 of Atmosphere Control Earth's Climate?!

Breaking News:

Oil Rebounds On Surprise Crude Draw

Alt Text

U.S. Shale Will Soon Produce More Oil Than All Of Russia

Despite growing pessimism in the…

Alt Text

Iran's Impossible Task: $194 Oil

As the global economy continues…

Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

More Info

Premium Content

Can Shell Afford To Drill In The Arctic?

How can Shell possibly finance the purchase of BG?

Royal Dutch Shell is set to report its first quarter earnings, and by all accounts, it will be a doozy. Analysts predict a 60 percent decline in earnings from a year earlier, including a massive 7 percent fall in production.

But the price tag for BG will be $70 billion, a colossal sum in a period of low oil prices. Shell has already said that it would undertake a major divestment campaign to rid itself of assets it does not see as integral to its future. Purchasing BG is a sign that Shell sees itself as a company that will be increasingly a producer of LNG and offshore oil. Related: Why The US Should Worry About Oil Sector Jobs

Shell will build up LNG production in Australia and East Africa, and oil production off the coast of Brazil. It has already divested itself of some assets in Nigeria and the North Sea.

Still, there is an elephant in the room that Shell has not yet explained. That is its ill-fated campaign in the U.S. Arctic. Shell has done all it can to keep its options open for the summer of 2015, moving rigs into place and securing the almost all of the necessary regulatory approvals. But it hasn’t fully committed on a return to drilling. Related: HSBC Advises Clients To Get Out Of Fossil Fuels

Environmental group Oceana has opposed Shell’s Arctic campaign from the start. It and other organizations have sued the federal government in hopes of nullifying Shell’s Arctic leases. Now it is turning to the Securities and Exchange Commission (SEC), arguing in a petition that Shell is putting its shareholders at risk with its campaign in the Arctic. Having already spent more than $6 billion, Shell has stated that it will spend another $1 billion on drilling several wells in the Chukchi Sea. But Oceana argues that the company’s financial health is at risk should there be an oil spill, which would lead to unknown costs.

BP is still reeling from its Deepwater Horizon disaster five years after it took place. If a similar event took place in the Arctic, it would be much more difficult to clean up, Oceana argues in its petition to the SEC. Shell has not spelled out those risks. “As we learned from Shell’s experience in 2012, the Arctic Ocean is remote and unforgiving,” Andrew Sharpless, Oceana’s CEO, said in a statement. “Companies like Shell cannot run from the reality that proposed oil drilling creates enormous risks for the ocean and for the company. Related: Oil, The Fed And The Ugly Truth About Capital Markets

That becomes all the more important with its proposed purchase of BG, which comes with a $70 billion price tag.

That begs the question of whether or not Shell will decide on its own to scrap its Arctic campaign. If its future is in LNG, perhaps the company will conclude that the Arctic is not worth the risk.

By Charles Kennedy of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play