Facing plunging profits, Royal Dutch Shell has announced it will cut exploration and development funding by nearly $10 billion this year, including halting their long-suffering plans to drill in the Arctic ocean. Shell’s new CEO, Ben van Beurden, made the announcement yesterday that controversial plans to drill off the Alaskan coast will be put on hold for another year.
The announcement comes just days after Shell suffered a legal setback in its efforts to drill in the Arctic Ocean, which has cost the company $5 billion and a series of embarrassing failures. Last week, a federal court ruled that the U.S. government hadn’t assessed the environmental risks of drilling in the Arctic Ocean. The lawsuit was brought to the court by environmental organizations and indigenous groups who fear an environmental disaster if Shell is allowed to drill in the Arctic seabed. Green groups have long said that fossil fuel companies have yet to prove they have the capacity to clean up an oil spill in the Arctic Ocean given stormy seas, extreme conditions, and ice cover for much of the year.
“The lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” van Beurden said in a statement. “We will look to relevant agencies and the court to resolve their open legal issues as quickly as possible.”
Moreover, green groups have criticized fossil fuel companies for seeking to exploit reserves in the Arctic when scientists have begun warning that most fossil fuel reserves will have to be left in the ground to avoid catastrophic climate change.
Still, while Shell will not be drilling in the Arctic this year, the Russian company, Gazprom, made history in December by being the first company to exploit offshore oil reserves in the Arctic Ocean.
In the fourth quarter of 2013, Shell’s adjusted earnings fell 48 percent, while it’s annual earnings were 23 percent down from 2012.
Environmentalists fear that an oil spill in the Arctic Ocean could be devastating for wildlife, including polar bears, which are already hugely impacted by climate change. Photo by: Scott Schliebe.
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