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Arctic Drilling: A Giant Gamble for the Planet and Shell's Bottom Line
It’s a gamble—some would say a giant gamble. Before even one litre of oil has been found, the Anglo-Dutch Shell group is believed to have spent more than US$7 billion—just making preparations for its latest Arctic venture.
Shell is betting on finding the oil industry’s Holy Grail: according to 2008 estimates by the U.S. Geological Survey, the Arctic contains more than 20 percent of the world’s remaining hydrocarbon resources—including at least 90 billion barrels of oil.
If Shell does strike oil in big quantities maybe its gamble will pay off—and its anxious shareholders can look forward to handsome payouts.
Environmentalists and scientists say any further exploitation of fossil fuels must be halted in order to limit the rise in average global temperatures to within 2°C of pre-industrial levels and avert serious climate change.
Drilling conditions in the Arctic can be treacherous: in 2012 a Shell rig which had been drilling for oil in the Beaufort Sea off Alaska ran aground in a storm and had to scrapped. Any oil spill in the ecologically rich waters of the Arctic could be catastrophic.
Hillary Clinton, President Obama’s former secretary of state and now a presidential contender, criticizes Washington for allowing Shell to drill.
“The Arctic is a unique treasure,” she says. “Given what we know, it’s not worth the risk of drilling.”
Shell says its operations meet the highest standards. “We owe it to the Arctic, its inhabitants, and the world to work with great care as we search for oil and gas resources and develop those at the request of governments across the region,” the company says.
The financial rationale of Shell’s move is also being questioned. Drilling in the Arctic is an expensive business and involves complex logistical challenges.
Analysts say so-called unconventional oil—crude recovered from difficult environments such as the Arctic—needs to command a price of between US$70 and US$100 a barrel to make its recovery economical.
At present, though oil demand is strong, there are deep uncertainties about future economic growth, particularly in China. Oil is staying stubbornly below US$50 per barrel. The big oil producers such as Saudi Arabia have not, as in the past, lowered output in order to shore up prices.
A tentative agreement between western nations and Iran on nuclear issues is likely to mean new supplies of Iranian crude hitting the international market, putting further downward pressure on prices. Despite continue bombing and communal strife, Iraq is gearing up its oil production.
One of the major factors influencing the downward movement of oil prices over recent years has been the development of the U.S. fracking industry, with vast amounts of oil and gas recovered from shale deposits deep underground.
Perhaps Shell—and big producer countries like Saudi Arabia—foresee an end to the fracking boom.
As recovery from shale deposits becomes more difficult and prices remain low, fracking is not enjoying the explosive growth it saw a few years ago.
Some drilling sites in the U.S. states of Texas and North Dakota are being abandoned. Several of the smaller fracking companies—which borrowed large amounts during the good times to finance their operations—have gone bust.
But there is still a global glut of oil: the International Energy Agency says there is unlikely to be a rebound in oil prices any time soon.
The drilling season in the Arctic is brief: the days shorten quickly and the ice begins to form. Shell—and its shareholders—will be hoping for quick returns.
International negotiators preparing for the climate summit in Paris later this year are calling for urgent action to head off global warming. There are many who hope Shell’s exploration activities will not succeed—and that the Arctic hydrocarbons stay where they are, thousands of feet below the seabed.
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A powerful volcano on Monday rocked an uninhabited island frequented by tourists about 30 miles off New Zealand's coast. Authorities have confirmed that five people died. They expect that number to rise as some are missing and police officials issued a statement that flights around the islands revealed "no signs of life had been seen at any point,", as The Guardian reported.
"Based on the information we have, we do not believe there are any survivors on the island," the police said in their official statement. "Police is working urgently to confirm the exact number of those who have died, further to the five confirmed deceased already."
The eruption happened on New Zealand's Whakaari/White Island, an islet jutting out of the Bay of Plenty, off the country's North Island. The island is privately owned and is typically visited for day-trips by thousands of tourists every year, according to The New York Times.
My god, White Island volcano in New Zealand erupted today for first time since 2001. My family and I had gotten off it 20 minutes before, were waiting at our boat about to leave when we saw it. Boat ride home tending to people our boat rescued was indescribable. #whiteisland pic.twitter.com/QJwWi12Tvt— Michael Schade (@sch) December 9, 2019
Michael Schade / Twitter
At the time of the eruption on Monday, about 50 passengers from the Ovation of Seas were on the island, including more than 30 who were part of a Royal Caribbean cruise trip, according to CNN. Twenty-three people, including the five dead, were evacuated from the island.
The eruption occurred at 2:11 pm local time on Monday, as footage from a crater camera owned and operated by GeoNet, New Zealand's geological hazards agency, shows. The camera also shows dozens of people walking near the rim as white smoke billows just before the eruption, according to Reuters.
Police were unable to reach the island because searing white ash posed imminent danger to rescue workers, said John Tims, New Zealand's deputy police commissioner, as he stood next to Prime Minister Jacinda Ardern in a press conference, as The New York Times reported. Tims said rescue workers would assess the safety of approaching the island on Tuesday morning. "We know the urgency to go back to the island," he told reporters.
"The physical environment is unsafe for us to return to the island," Tims added, as CNN reported. "It's important that we consider the health and safety of rescuers, so we're taking advice from experts going forward."
Authorities have had no communication with anyone on the island. They are frantically working to identify how many people remain and who they are, according to CNN.
Geologists said the eruption is not unexpected and some questioned why the island is open to tourism.
"The volcano has been restless for a few weeks, resulting in the raising of the alert level, so that this eruption is not really a surprise," said Bill McGuire, emeritus professor of geophysical and climate hazards at University College London, as The Guardian reported.
"White Island has been a disaster waiting to happen for many years," said Raymond Cas, emeritus professor at Monash University's school of earth, atmosphere and environment, as The Guardian reported. "Having visited it twice, I have always felt that it was too dangerous to allow the daily tour groups that visit the uninhabited island volcano by boat and helicopter."
The prime minister arrived Monday night in Whakatane, the town closest to the eruption, where day boats visiting the island are docked. Whakatane has a large Maori population.
Ardern met with local council leaders on Monday. She is scheduled to meet with search and rescue teams and will speak to the media at 7 a.m. local time (1 p.m. EST), after drones survey the island, as CNN reported.
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