WASHINGTON — The future of oil exploration in some U.S. Arctic waters may rest with federal courts, but Royal Dutch Shell’s CEO said Thursday the company is undaunted by the legal logjam.
“The fact that we can’t move ahead now legally doesn’t meant that we have slowed everything down,” CEO Ben van Beurden told reporters in a conference call to discuss Shell’s second quarter earnings. “We are continuing to be ready for a campaign when we are allowed to do so.”
Van Beurden’s comments Thursday marked a shift from his previous suggestions that Shell’s Arctic ambitions might not mesh with the company’s bid to prove its fiscal restraint to investors. And his words fly in the face of environmentalists now trying to convince Shell’s shareholders that Arctic oil exploration is unwise.
Shell has already spent nearly $6 billion in a quest to find oil at the top of the globe. Although the company began boring wells in the Chukchi and Beaufort seas in 2012, the grounding of its Kulluk drilling unit later that year and the legal uncertainties surrounding some of Shell’s oil leases in the region have sidelined the work ever since.
Van Beurden stopped short of saying Shell is committed to resuming its Arctic oil drilling in summer 2015, but did say that the company is continuing to pursue permits necessary to do the work.
“We will continue to work with local stakeholders on logistics and on permitting to keep the option to drill there safely in the future,” he said. “We will only (execute our drilling campaign) when all the conditions are fulfilled — all the technical conditions, as well as the permit conditions (and) the legal challenges and blockages that need to be removed. When that will be, I don’t know; it is impossible to say at this stage.”
Shell is in talks with regulators at the Bureau of Ocean Energy Management over its proposed Chukchi Sea exploration plan. In June the agency asked Shell for more information about its proposal, including proof that deficiencies with its contracted drillship, the Noble Discoverer, have been resolved.
Related story: Feds ask Shell for assurances on Arctic drilling
The exploration plan forms the overarching blueprint for Shell’s drilling in the Chukchi Sea; the company still would have to secure individual drilling permits and get other authorizations.
The company also is required to complete a management audit that regulators requested after the Kulluk loss and other mishaps marred its 2012 drilling season.
In the meantime, bureau regulators are redoing the environmental analysis that laid the foundation for the 2008 sale of oil and gas leases in the Chukchi Sea, including those where Shell’s work has been under way.
Van Beurden’s comments Thursday marked a departure from his approach in January, when the CEO suggested Shell would carefully consider its Arctic portfolio as the company sheds some assets and works to prove its capital discipline to shareholders.
Arctic abandonment: Oil companies forfeit Arctic drilling rights
On Thursday, Van Beurden instead highlighted the Arctic’s potential to help meet global energy demand projected to double over the next few decades.
“The world will need access to more oil, and the Arctic is a huge area as far as prospectivity — and there is a significant area already in production,” he said. “In my mind, there is no doubt that the Arctic will be explored.”
Environmentalists who oppose Arctic drilling and historically have worked to persuade regulators to block the activity now are focusing increasingly on investors.
“It’s worth paying a lot of attention to the investors, because that is an enduring type of decision,” said Lois Epstein, director of The Wilderness Society’s Arctic Program.
Some companies have already shed their holdings in U.S. Arctic waters, allowing leases to expire or relinquishing them early. Others with active leases, including Norway’s Statoil and Houston-based ConocoPhillips, have put their exploration plans on hold.
In a briefing for investors and reporters earlier this month, the conservation group Oceana highlighted the financial risks of Arctic oil exploration.
“Now is the time to ask Shell how it is managing these risks to safeguard shareholder value,” the group said. “Has Shell quantified the risk of a major accident or appropriately weighed the likely efficacy of its proposed response? Has it prepared contingency plans to fund response, restoration, fines and litigation without risking insolvency?”
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