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Shell spill: What happened and why it matters to Shell

By Damian Kahya Business reporter, BBC News 19 August 2011

Environmental groups are furious that the largest North Sea spill in a decade was not revealed to the public for three days.

Why did it happen and will Shell’s recent environmental problems affect the company’s ambitious plans?

On 10 August, a routine helicopter flight over the North Sea spotted a “sheen” on the sea’s surface near Royal Dutch Shell’s Gannet Alpha platform.

The oily sheen covered just 0.5 sq km to begin with, according to figures provided to the BBC by Shell.

But it was an indication that below the surface, something was leaking.

Shell immediately informed regulatory bodies, including the Department of Energy and Climate Change (DECC) and the government’s Joint Nature Conservation Commitee.

The DECC says, however, that it remained up to Shell to decide when and how to make the information public.

Finding the leak

The company initially struggled to find the source of the leak.

“On Wednesday this slick, or sheen, was unattributed, so it could have come from anywhere,” said Hugh Shaw, the government’s representative for maritime salvage and intervention, during a press conference a week later.

Shell had reported no loss of oil inventory alerting it to a spill.

“To try and identify the source has been quite frustrating at times, it’s taken some time, it’s meant Shell systematically shutting down the system to see what the impact of shutting down certain valves was and that has helped us come down to this source,” said Mr Shaw.

It is during these first two days that most of the estimated 1,300 barrels of oil were discharged into the North Sea, in the area’s largest spill for a decade.

By Thursday morning, the spill covered a surface area of 1.3 sq km squared – then by the evening, it had spread to 21 sq km.

The reason for the rapid change is not yet known. Extra oil could have reached the surface, but it is also likely rough weather spread out the existing sheen over a wider area.

Lack of information

Despite the now substantial sheen, Shell still did not inform the media or the public about the spill.

Shell deployed a remote-operated vehicle to find the leak in a pipe flowing between an oil well and the Gannet Alpha platform.

The company shut off the well and depressurised the pipeline, stemming the flow of oil.

On Friday afternoon, an oil industry journal, Upstream, ran a short article about the spill- based on its own sources.

Shortly after being contacted by the magazine, Shell issued a press release saying it had “stemmed” the leak significantly.

Shell says it delayed releasing information on the leak until it had established the nature of the problem.

“We released the information when we were confident about the information,” said Glenn Cayley, technical director of Shell’s exploration and production activities in Europe.

Even then, the company could not, or would not, specify the exact size of the leak.

‘Dumb’ move

The lack of information provoked fury amongst environmental groups.

Some groups, such as the Royal Society for the Protection of Birds, have expertise in dealing with any environmental impact from a spill.

“We want to and need to be informed at absolutely the earliest opportunity because we have a considerable degree of expertise on these sorts of things,” says James Reynolds from RSPB Scotland.

Other campaigners, including Greenpeace, Friends of the Earth and oil pressure group Platform, have joined the criticism.

The RSPB has called for a transparent inquiry into the incident and the company’s procedures in the North Sea.

Shell has since apologised for the lack of information and say it was not a deliberate attempt to cover up the spill.

“It seems to me more dumb than planned,” said Frederic Hauge from Bellona, a Norwegian environmental group which monitors the North Sea.

“My impression has been that Shell learned the lesson after Brent Spa when it came to communications and it’s maybe time to read those papers again,” he added.

The company says that since Saturday, it has used social media to give information, with 35,000 followers on Twitter.

North sea leaks

Although major leaks have been few, small problems in the North Sea have beset the industry.

In the Gannet field, figures obtained under the Freedom of Information Act by the Guardian newspaper – and now publicly available – show there were 10 incidents reported to the Health and Safety Executive (HSE) between 2009 and 2010, one of which was classed as “significant”.

The company has also had problems in its Brent field, one of the first major oil fields explored in the North Sea, which recently benefited from a £1.3bn upgrade.

On 1 July this year, the HSE issued Shell with a prohibition notice on the field’s C platform, because of a release of gas.

“HSE can confirm that a prohibition notice was served on Shell on 1 July over hydrocarbon release issues on the Brent C platform. The rig is currently ‘shut in’, which means it has complied with the prohibition notice ordering activity to stop,” said an HSE spokesperson.

“Shell continues to progress work on Brent Charlie. Production will not resume until all necessary work is complete,” said a Shell spokesman.

Nigeria liability

Shell has also had problems further afield. The company has been involved in continuing legal action in London regarding its activities in Nigeria.

In August, Shell admitted liability for two spills in 2008.

It is the first time the company has admitted liability for a Nigerian spill in a London court.

The company claims about 4,000 barrels of oil were spilt, although this figure is disputed by environmental pressure groups.

It also claims that most spills in the region are due to sabotage, but it tries to clean up the spill, whatever the cause.

However, a recent report by the United Nations Environment Agency said that 10 out of 15 investigated sites which Shell said it had completely cleaned up still had pollution exceeding Shell and the Nigerian government’s best practice levels.

Shell says that, despite this, more than 90% of samples taken by the UN at the sites were within standards.

Bottom line

But such worries do not mean the company is performing badly.

“Every company has leaks,” says Iain Reid, an oil company analyst at Jeffries Investment group.

At 1,300 barrels so far, the North Sea leak is a tiny fraction of BP’s Macondo well spill in the Gulf of Mexico last year.

And in July, Shell reported second quarter profits up 77%.

“The shareholders are happy, even if the journalists aren’t,” adds Mr Reid.

But shareholder performance depends, to an extent, on securing new reserves of oil and gas.

At the start of August, Shell received conditional approval in the US to drill four exploratory wells in Alaska’s Beaufort Sea.

But the decision is subject to appeal and environmental groups, such as Greenpeace, are watching events in the North Sea closely.

“Any relevant information with regard to Shell’s operational competency will be included in this appeal, when it is relevant to a specific permit,” said Vicky Pryce from the pressure group.

The DECC has confirmed that the UK investigation may also lead to fines.

“Incidents like the one we’ve seen in the North Sea clearly will influence how much trust people have in how well and responsibly oil companies can exploit the oil and gas in the Arctic,” says Daniel Litvin, director of advisory firm Critical Resource.

His firm provides independent analysis to the major resource companies on corporate responsibility issues and political risk.

For now, Shell will be focused on stopping the spill, which it says is down to less than one barrel a day.

Then it will need to handle potentially wider regulatory and political implications that come from any spill.

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