The Coast Guard yesterday established a "safety zone" and a "voluntary free speech area" around the Fennica, an icebreaking ship under contract with Royal Dutch Shell PLC, protecting the ship and those protesting the firm’s drilling activities in the Arctic.
The practice has become routine for the Coast Guard: The agency has designated at least three so-called "First Amendment areas" since April around three different vessels related to Shell’s drilling operations in the Chukchi Sea.
The rule, which will expire Aug. 22, carves out a buffer zone of at least 100 yards around the Fennica and a First Amendment zone for activists — specifically, members of a "kayak flotilla" — to demonstrate.
A spokesman for the Coast Guard’s marine safety unit in Portland, Ore., said the agency often provides safety zones around military or "high target" vessels, such as those singled out by environmental protesters.
Greenpeace activists had festooned the St. Johns Bridge, which crosses the Willamette River, with colorful ribbons and suspended themselves from the structure in hammocks while kayakers waited below, all in an attempt to waylay the vessel as it headed out to sea.
"Last I heard," the spokesman said of the ship’s location, "it left the Columbia River last week."
The Polar Pioneer, a drill rig for the oil major, broke ground on its first top hole in the Chukchi Sea on Friday (EnergyWire, July 31). But federal officials have required the Fennica to carry a capping stack that can trap oil leakage if a well ruptures and be on-site with actively drilling ships before Shell can crack into any rocks containing oil.
While the Fennica is free of Greenpeace demonstrators, the controversy over Shell’s presence in the Arctic comes at an interesting time, as some investors have questioned the financial sense of drilling in a high-cost region and the company has sent mixed signals about climate risks.
A company in transition
Royal Dutch Shell’s CEO, Ben van Beurden, along with several other chief executives of European oil and gas firms, recently signed a letter addressed to Christiana Figueres, executive secretary of the U.N. Framework Convention on Climate Change, calling for a price on carbon.
The company also backed a shareholder resolution, which the Anglo-Dutch firm’s board backed, calling for long-term planning in a carbon-constrained world. Meanwhile, company officials and market analysts have said the firm’s merger with BG Group, a massive British natural gas supplier, is another sign that the company is planning sustainably.
Environmental questions and statements were heavily featured during the company’s annual shareholder meeting in May.
Van Beurden at the time pilloried the idea of cutting back investment toward new production due to climate risks, telling investors such an idea "ignores the reality of our industry and, as a matter of fact, it actually risks distraction from the real issues around energy transition needs." Rather, to meet future demand, he said, "we will need sustained and substantial investment."
Still, an oversupplied oil market in which both domestic and foreign crude benchmarks have slid below $50 per barrel has nudged Shell to start trimming.
Costs sharply up; oil prices and profits slump
Reporting its second-quarter results last Thursday, the company announced it would cut 6,500 jobs before the year is out and rein in capital expenditures for exploration and production by 20 percent, compared to last year. The company’s profits slumped 35 percent year over year. Peers Exxon Mobil Corp. and Chevron Corp. reported their worst quarterly performance of the present decade.
The company has invested an estimated $7 billion since 2008 in the Chukchi region without a drop of oil to show. But van Beurden last week defended the choice to push forward, telling reporters the Arctic oil field could "be multiple times larger than the largest prospects in the U.S. Gulf of Mexico, so it’s huge."
Shell plans to drill in the Arctic next summer, too, and the company has called the stake "a long-term play," though some analysts question the sense of drilling with oil south of $50 a barrel. (Arctic offshore drilling is among the most expensive types of oil exploration and comes with significantly thinner margins, requiring prices more than $100 to typically break even.)
The Shell-in-the-Arctic saga has also brought into relief what some environmentalists view as hypocrisy from President Obama.
"Watching #maddow covering the Fennice story and I’m wondering why Obama gov allowed Shell to drill in the Arctic," wrote one Twitter user in the United Kingdom last night. "Impressive rhetoric, great video, yet Fennica left for Arctic to drill. It’s a bit contradictory, don’t you think?" wrote another in response to the White House’s Clean Power Plan announcement.
A third asked the president why the Fennica was allowed out of Portland, telling him "we need a leap not a step" to address climate change.