Shell shares slump as it gets green light for Arctic drilling

Oil major has spent $7bn of past decade in region, but is yet to find a drop of oil

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The Independent Online

Shell’s shares slumped today after the US government finally gave it the green light to drill for oil and gas in the Arctic Ocean.

The FTSE 100 oil giant will be able to explore the ocean floor for hydrocarbons for the first time since 2012, when a series of mishaps including the grounding of a drilling rig off the coast of Alaska, ended a costly Arctic programme that has cost $7bn over the past decade and has yet to find a drop of oil.

But despite receiving final clearance by the Obama administration to finally resume drilling, investors were unimpressed, sending the group’s shares down by 14.50p, or 0.81%, to 1,778.50p.

Although the Arctic potentially offers vast untapped resources of oil and gas, it is  high-risk, extremely difficult to access and it could be at least ten years before any commercial production began, analysts said. #

Furthermore, the oil services group John Wood today reminded the City that conditions in today’s low oil price environment are likely to remain tough for a while, warning that  there was “little prospect of short term improvement in market conditions”.

Shell welcomed the decision by the US government to allow it to proceed and sought to reassure stakeholders that it would operate safely in the pristine Arctic environment.

“We remain committed to operating in a safe, environmentally-responsible manner and look forward to evaluating what could potentially become a national energy resource base,” a company spokesman said.

The US Department of the Interior permit allows Shell to drill in the oil-rich Chukchi Sea off the northwest coast of Alaska. Harsh conditions in the Chukchi have discouraged other oil companies from drilling there.

"Activities conducted offshore Alaska are being held to the highest safety, environmental and emergency response standards," said Brian Salerno, director of the Interior Department's Bureau of Safety and Environmental Enforcement.

"We will continue to monitor their work around the clock to ensure the utmost safety and environmental stewardship," he added.

The go-ahead for Shell comes after repairs were completed to the Fennica, an icebreaker the company leases that carries emergency well-plugging equipment. The ship had suffered a gash in its hull after hitting uncharted shoals off southern Alaska.

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