Shell Oil Suspends Operations in Arctic

New Wave Media

October 21, 2013

polyarnaya zvezda

polyarnaya zvezda

credit: Gazprom

Following an inability to disclose what safeguards it has put in place after the grounding of an offshore oil rig in Alaska last New Years, Shell Oil and Russian-owned Gazprom have halted plans to create two new drilling rigs off the Russian island of Sakhalin. The move comes weeks after a report was released by Pew Charitable Trusts stating that drilling in the arctic presents "a new set of challenges and a larger set of risks" for O&G companies that plan on drilling in the arctic.

The move also comes as Russia holds 28 activists and 2 photographers associated with Greenpeace for attempting to board a Russian oil rig in the Pechora Sea. 

Shell Oil's troubles in the Arctic have been ongoing for the last few years. In March 2013, former Secretary of the Interior Ken Salazar went on record saying, "Shell will not be allowed to move forward into the Arctic to do any kind of exploration unless they have an integrated plan in place that's satisfactory to the Department of the Interior." 

But the move to suspend operations on Sakhalin are outside the boundaries of United States jurisdiction. Shell first gained access to the Russian island's oil fields in 1994 when it arranged a deal stating that it would pay no royalties to the Russian government until all costs associated with setting up a plant were recouped. In 2007, Gazprom wrestled back majority control over the island, which is estimated to hold over 1.2 billion barrels of oil and 500 million barrels of natural gas. Due to environmental reasons, progress on the plant's construction has been halted numerous times in recent years. 

Shell and Gazprom will delay decision on a permanent platform until 2017.