A race is underway for the Arctic by a new rush of 21st century pioneers. With icecaps melting, all eyes turn to the Arctic in the hopes of exploiting newfound opportunities. With many existing oil reserves facing depletion, the Arctic is thought to be the final frontier for fossil fuel development. It is estimated approximately 13% of the world's undiscovered oil (90 billion barrels), and 30% of the world's undiscovered natural gas1 lie offshore in the Arctic. Shell, just one of the of the many O&G companies interested in the Arctic, has already spent 6 years and over $5 billion dollars in attempts to drill the pristine north.
Over and above Big Oil’s attention, the Arctic is the center of geopolitical battles, national security interests, and the focus for a plethora of environmental NGO’s and activists alike. Due to shell’s recent history in the arctic, they have become the focal point for many debates since in all their attempts Shell has yet to locate any oil in the Arctic. Recently, following an endless string of incidents and near misses in 2012, Shell decided to pause their Alaskan Arctic drilling mission for 2013, which was then followed by a ban from the US stating “Shell will not be able to move forward into the Arctic to do any kind of exploration unless they have an integrated management plan put in place2”. Additionally, due to a partnership they have with Gazprom, Shell has managed to find it self tangled in the midst of a battle between environmental activists and the Russian Government. Currently, Shell is facing a mess of market and non-market issues with their Arctic exploration, ranging from dropping profits to safety and environmental concerns to NGO’s who want the Arctic to have the same status as the Antarctic to geopolitical issues with varying government interests.
The question remains - what should Shell’s next step be in light of the recent developments? It is inevitable that in the foreseeable future, there will be companies in the arctic drilling for oil. Shell being one of the worlds largest oil companies in the world has the power and influence to change the direction of the industry when it comes to its approach to the Arctic. To successfully reap the rewards the Arctic has to offer, Shell needs to work with international bodies such as the UN and the Arctic council to set regulations for drilling in the Arctic. Once Shell returns to the arctic, they need to do so in a way that is environmentally responsible. This will likely require newer, innovative technologies to do so, to accomplish this Shell should look at countries such as Japan, Korea and Germany who have these capabilities. In this paper we will further detail the issues facing shell and our recommended action plan to successfully mitigate their risks and navigate their way in to the Arctic.
Arctic Issues →
The Arctic is an unfriendly climate, with limited infrastructure, which makes exploitation very costly and exposes the company...