Shell frozen out of the Arctic

Royal Dutch Shell has given up on the Arctic after its first well in the region’s Chukchi Sea turned out to be a dud.

762-polar-bear-634

Shell was right to beat a retreat

Royal Dutch Shell has announced that it will stop exploring for oil and gas in the Arctic after its first well in the region's Chukchi Sea turned out to be a dud. Shell had spent around $7bn on Alaska since 2007 around a fifth of the group's exploration budget. The whole episode will cost Shell $9bn, according to Deutsche Bank.

What the commentators said

Still, you can see why it happened. In 2008 it was attempting to top up the group's dwindling reserves after an accounting scandal. The Arctic, which, according to the US Geological Survey holds 90 billion barrels of oil, seemed an obvious bet, especially with the price of black gold at over $140 a barrel.

But the reserves might not have been recoverable until 2030, added Fiona Maharg-Bravo on BreakingViews.com, and when the oil price slumped last year, the whole thing became "an unaffordable luxury". The numbers haven't added up since oil fell below $100, said Nils Pratley in The Guardian, which happened a year ago. So why did it take so long to beat a retreat? Perhaps, having spent so much, Shell felt it had to hang on and find out what lay beneath its exploratory well.

But "one suspects an equal role was played by old-fashioned corporate pride". Both environmentalists and shareholders will be relieved, said Maharg-Bravo. Shell will now be able to spend around $800m a year on more promising projects, or shoring up the group's dividend. It will also be able to concentrate on its $70bn takeover of BG. Ditching the Arctic is a step forward.

Recommended

Should you buy Vodafone shares, or steer clear?
Share tips

Should you buy Vodafone shares, or steer clear?

Vodafone grew revenue by 4% and profit by 11% last year, and offers investors a 6.4% dividend yield. So should you buy Vodafone shares? Rupert Hargrea…
17 May 2022
Melrose Industries: a British manufacturer that is well-placed for recovery
Share tips

Melrose Industries: a British manufacturer that is well-placed for recovery

Melrose, the aerospace and automotive manufacturer, has been hit by the pandemic, but the shares are unduly cheap says David J Stevenson.
17 May 2022
Avoid easyJet shares – there are better airlines to invest in
Share tips

Avoid easyJet shares – there are better airlines to invest in

EasyJet used to be one of Europe’s most impressive airlines. But now it is facing challenges on all fronts and losing out to the competition. Rupert …
16 May 2022
Britain’s ten most-hated shares – w/e 13 May
Stocks and shares

Britain’s ten most-hated shares – w/e 13 May

Rupert Hargreaves looks at Britain's ten-most hated shares, and what short-sellers are looking right now.
16 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
High inflation will fade – here’s why
Inflation

High inflation will fade – here’s why

Many people expect high inflation to persist for a long time. But that might not be true, says Max King. Inflation may fall faster than expected – and…
13 May 2022