Why Is Shell Leaving The Arctic And What Will Happen Next?

Royal Dutch Shell, one of the world’s largest oil companies, just announced that they will be withdrawing drilling operations from the Beaufort and Chukchi seas. As they leave behind a potential 15 billion barrels of crude oil they also put an end to almost a decade of drilling efforts and billions of dollars put toward oil exploration and excavation. Shell is now following in the tracks of Chevron and Exxon, which have similarly abandoned plans for continued Arctic drilling. Many are wondering what has ultimately lead Shell to this decision, as well as what and who will be most affected in the near future.

Image Source: Wikimedia

What’s Led To The Drilling Decision?

Environmentalist may be cheering Shell’s decision, perhaps confident that their efforts to aggressively fight Arctic drilling finally had a major impact. While the development may be seen as a victory when it comes to eco-based concerns, that’s not the sole driving force. Granted an article oil spill would be an unprecedented environmental disaster and prevalence of alternative energy options have made oil a tougher business, there are still a number of other factors that have led to to the withdrawal.


The Costs Of Crude

One of the primary reasons for Shell's decision were the disappointing results from exploration of an Arctic well that the company hoped to tap. It also goes without saying that managing oil operations in the arctic has become a more costly business. Natural conditions make oil expeditions and the excavation process an exceptionally tough job. Though Shell and other oil companies are well aware of what comes with such territory, the falling price of oil, growing reliance of natural gas, and the prospects of a potential Arctic version of the Deepwater Horizon disaster, have made the Beaufort and Chukchi seas even less hospitable and profitable and a great deal riskier. On top of these realities, the costs of restrictions and permits also meant that Shell had already spent billions of their operations budget before drilling had even begun.

Image Source: Wikimedia

What Will Happen To Alaska?

This doesn’t mean that Shell and others have outright given up on plans to obtain oil from the Arctic; instead waters of Norway and Russia are more likely to become the location of their long term plans—pending the price of oil. So what will that mean for Alaska and the many, many jobs that depend on oil industry activity there? Considering how petroleum funds the vast majority of the state government, Alaska has already been plagued by budget gaps due to the decline in oil prices. With Shell’s departure, that situation could go from bad to worse. Will this environmental victory mean devastation for our northernmost state? Is this simply a reality we must face along with the need to phase out fossil fuel reliance? What are your thoughts on Shell’s decisions and the many factors that have contributed to it?

Article Sources:
http://www.manufacturing.net
http://www.wired.com
http://www.latimes.com

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