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Here’s How Royal Dutch Shell Plans On Tackling Challenges In The Arctic

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By: MICHEAL KAUFMANMay 11, 2015 

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) is reconsidering drilling in the Chukchi Sea in Alaska. Drilling in Alaska is considered a dangerous job as temperature levels are low and the topography of the region would make it difficult to contain an oil spill if it were to occur. The crude oil supply glut created by the US has caused oil prices to plummet by more than 50% in the second half of the last year. In addition, the costs of production of operating in the region are high, making it a challenge for any company to operate in the region.

Despite all the problems, Shell is determined to recommence drilling in the area. The area has significant oil reserves and the company wishes to cash in on the opportunity. According to a survey by the US Geological, the area has about 13% of the world’s-undiscovered oil reserves. These reserves, according to the current consumption rate, are equitable to three years’ worth of resources.

However, due to potential risks associated with operating in the Arctic, Shell is facing numerous complaints from protestors around the world. Greenpeace protestors have been Shell’s biggest concern. In April, around six climbers of Greenpeace climbed and intercepted Shell’s drilling unit called the Polar Pioneer. The move was aimed at protesting against Shell’s drilling plans in the region.

The activists have indicated that drilling in the Chukchi Sea cannot be performed safely, citing one of the biggest Arctic sub-contractors of Shell, Noble Drilling. The sub-contractor considered itself guilty along with Shell for committing around eight fines, along with Shell’s failed efforts, for drilling in the region in 2012.

Greenpeace earlier in 2012 had warned Shell regarding the risks of operating in the Arctic. The areas waters are considered to be one of the world’s beautiful landscapes, and thus Greenpeace is concerned that a spill in the region could end up damaging the environment.

Following the interception in April, Greenpeace has been ordered by a federal judge to stay away from Shell’s drilling units and ships. In addition, Sharon Gleason, a US District Court judge has forbidden Greenpeace from flying unmanned vehicles to the Arctic offshore drilling areas of Shell.

Shell was quite happy with the latest development. As reported by the Daily Republic, Shell on the issue, said, “We cannot condone Greenpeace’s unlawful and unsafe tactics. Safety remains paramount.”

However, Greenpeace was rather disappointed with the development. A spokesman of Greenpeace, Travis Nichols, said, “Instead of saying Greenpeace can’t go near Shell, our government should be saying Shell can’t go near the Arctic.”

Shell currently has submitted new plans to the US Interior Department regarding its Arctic drilling plans. The new plans are being reviewed by the Bureau of Ocean Energy Management (BOEM), which has until May 10 to come up with a decision.

These new plans are an upgrade to the company’s 2012 plans, which were approved by the US Bureau of Safety and Environmental Enforcement (BSEE).

Shell has indicated in the plans how it intends to avoid devastating oil spills in the region. If a problem regarding the well was to occur, the company would deploy its oil-response assets within an hour. Trained individuals would be expected to analyze and assess the situation, and decide whether the deployment of a blowout preventer is required or not.

Shell is currently developing 25 vessels that would be responsible for a two-year drilling plan in the Chukchi Sea off the coast of Alaska. Drilling by Shell in the Arctic initially began in July 2012, but the company had to pull out of the region in the same year as a vessel went aground.

If Shell’s plans are approved, it would greatly disappoint the Greenpeace activists. The oil company on the other hand would be able to access massive reserves in the area. Shell would have to act responsibly and ensure that such spills do not occur in the region.

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