By: MICHEAL KAUFMAN: Sep 1, 2015
Royal Dutch Shell Plc’s (ADR) (NYSE:RDS.A) drilling operations in the Arctic had been temporarily halted due to adverse weather conditions in the region. The company has now resumed part of its operations and has also indicated that drilling plans will continue in full swing once the company completes a comprehensive system check on its operations.
This is the first time since 2012 when Shell will resume operations in the Arctic. Shell halted drilling in the region when its Kulluk rig went aground. At that time, the company was blamed for not fully assessing the situation and failing to evaluate the risks associated with drilling in the Arctic region.
The Obama Administration, however, decided to allow the company to re-enter the Arctic region last month. The ruling was met with severe criticism from various environmental groups, particularly Greenpeace. Environmentalists expressed concern that climatic change has led to glaciers melting faster and that drilling in the region would only quicken the melting process. Furthermore, Shell is also said to be not fully equipped to handle a spill in the region, which could lead to further environmental damage. There are also concerns that the wildlife, particularly the polar bear and walrus species, in the region will also be impacted due to the drilling process.
Shell, meanwhile, is intent on continuing with its plans so as to lay its hands on the massive oil and gas reserves in the area. The Arctic is believed to be home to 30% of the world’s undiscovered natural gas as well as 15% of the world’s oil reserves. Hence, the oil major looks determined to drill in the region despite the high costs associated with the process. Shell is also not deterred by the 50% decline in crude prices that have been known to severely impact profitability for oil companies.
Shell is in an expansion phase. The company recently confirmed its $70 billion acquisition deal with BG Group plc. (ADR) (OTCMKTS:BRGYY). The acquisition will allow the company to increase its natural gas exposure.
Shell stock is down 2.29% to $51.66 in premarket trading today, as of 5:38AM EDT.
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