Shell drops plans for exploration in Arctic watersNews // January 31, 2014
Speaking to investors earlier this week, Shell's new CEO Ben van Beurden provided an update on the company’s priorities which, he said, were improving the company's financial results and achieving better capital efficiency, as well as continuing to strengthen operational performance and project delivery.
Van Beurden, who became the new CEO of Royal Dutch Shell plc on 1 January 2014, said Shell’s strategy overall was "sound" but announced a number of changes, including dropping plans for further exploration in Arctic waters.
He said Shell will continue to invest in new projects that deliver more energy to customers, and create value for shareholders. The strategy is designed to deliver through-cycle growth in cash flow, to drive competitive returns and a growing dividend.
Mr Van Beurden said: “Our ambitious growth drive in recent years has yielded a step change in Shell’s portfolio and options, with more growth to come, but at the same time we have lost some momentum in operational delivery, and we can sharpen up in a number of areas.”
“Our overall strategy remains robust, but 2014 will be a year where we are changing emphasis, to improve our returns and cash flow performance”, he continued, highlighting three priorities:
• Improved financial performance, including restructuring in some areas of the company
• Enhancing capital efficiency, with hard choices on new projects, reduced growth investment, and more asset sales
• Continued strong delivery of new projects, and integration of recent acquisitions.
The landscape the company had expected has changed, he said. Factors such as the worsening security situation in Nigeria in 2013, and delays to non-operated projects in several other countries, have altered the outlook. Oil prices remain high globally, but North America natural gas prices and associated crude markers remain low, and industry refining margins are under pressure. Restructuring and improving profitability in North America Upstream resources plays, and Oil Products world-wide, is a particular focus for the company.
Mr Van Beurden said the recent Ninth Circuit Court decision against the Department of the Interior raises substantial obstacles to Shell’s plans for drilling in offshore Alaska.
As a result, Shell has decided to stop its exploration programme for Alaska in 2014.
“This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” Mr van Beurden said. “We will look to relevant agencies and the Court to resolve their open legal issues as quickly as possible.”