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Shell to Stop Drilling for Alaskan Oil Due to Falling Profits
Shell’s incoming CEO Ben van Beurden recently announced that a court ruling has placed “significant obstacles” in the way of oil exploitation in Alaska. Europe’s largest energy company also announced that it will cut capital spending by around $10 billion this year and sell many of its assets in an effort to become more efficient. As old oil fields fade faster than new ones can be tapped into, Shell plans to shift its focus towards liquefied natural gas projects in places such as the Gulf of Mexico and Brazil.
Shell purchased nearly $7 billion worth of shale assets in the U.S. on Voser’s watch, only to write down their value by $2 billion last summer. Investec analyst Neill Morton also predicted that further writedowns in the value of Shell’s North American shales assets are likely, Huffington Post reports. While Van Beurden may not be willing to commit further resources to drilling in Alaska in 2014, he did say that the company would look to resolve the legal issues “as quickly as possible.”
Apart from difficulty gaining access to Alaskan oil fields, overall production was also affected by the closure of wells in Nigeria due to security reasons. Of the five per cent reduction to 3.25 million barrels per day, two can be attributed to the security issues that have occurred in Africa.
While Shell may also reduce investments in Nigeria, their main point of concern is the northern United States. Oil prices remain high around the world, but “North America natural gas prices and associated crude markers remain low, and industry refining margins are under pressure.”
Much of this is actually good news for environmentalists and sustainable energy companies that have known for a long time that oil drilling is not an activity that can go on forever. It’s true that Shell will focus their attention on other non-sustainable resources in the meantime, but renewed regulations and restrictions could eventually leave them with no choice but to embrace renewable energy sources instead.
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