Shell defends Arctic oil plans as investors raise concerns

[LONDON] Royal Dutch Shell Plc defended its planned return to Arctic drilling, saying new spill-containment systems would prevent a disaster in the event of an oil leak.

Shell has carried out tests in an environment that replicates Arctic conditions, Chief Executive Officer Ben Van Beurden said Tuesday at a shareholder meeting in The Hague. The company would be able to deploy equipment within an hour of an accident, he said.

"We are actually also doing what I believe is unprecedented and over and above requirements that a regulator would set," Mr Van Beurden said. "We have gone to tremendous lengths to make sure we understand the risks."

Shareholders raised concerns at the meeting as Shell outlined plans to return to the Arctic three years after its rig ran aground in a storm and it was fined for air pollution.

"You're sending now an armada to Alaska," Mark Van Baal, founder of Follow This, a movement of green investors in Shell, told Van Beurden. "Shell will spend billions and billions. Send the armada not to Alaska but to the North Sea and build wind farms instead."

This is among opponents who say drilling would threaten pristine areas and wildlife already at risk from global warming, while a spill could contaminate the region's fragile environment. Shell contends that the world needs a continuous supply of oil to meet consumption.

Without further investment in production, the gap between supply and demand may widen to 70 million barrels a day by 2040, according to Mr Van Beurden. That's almost seven times Saudi Arabia's current output.

Campaigners from Greenpeace showed up outside the meeting to protest Shell's plans. Inside, shareholders also questioned why they should support a drilling program that could pollute waters and contaminate seafood.

In response, Mr Van Beurden said that companies have drilled 41,000 wells on the Arctic continental shelf to date and there hasn't been a single oil spill.

Shell wants to resume drilling in the Chukchi Sea off Alaska this summer and continue next year, the CEO said. The company needs more approvals from the US government before it can start.

President Barack Obama is seeking to strike a balance between oil demand and concerns that climate change is increasing, Robert J Papp Jr, the State Department's special envoy for the Arctic, said Monday.

Shell also faced protests earlier this month in Seattle when demonstrators in kayaks resisted the entry of the Polar Pioneer drilling rig, which the company plans to use in the Arctic, the Guardian newspaper reported May 16.

Shell, which discovered oil off Alaska's Arctic coast in 1986, is the first major explorer to return to the region since the last drilling boom there fizzled almost 30 years ago amid slumping crude prices.

"A lot of measures have been put in place to deal with the very unlikely event of a spill," Mr Van Beurden said. "Nowhere ever in the industry has there been taken so much precautionary measures."

Exxon Mobil Corp, BP Plc and other producers have discovered more than 10 billion barrels of oil in North American Arctic seas since the early 1970s. Those resources remain locked beneath the sea floor because of a lack of pipeline capacity to haul them to faraway markets.

BLOOMBERG