Shell suspends drilling in Alaska as profits plunge
Dutch Shell will suspend drilling in offshore Alaska after a
United States court decision and as the oil major streamlines operations following a slump
in annual profits, it said on Thursday.
The Anglo-Dutch group said it would halt the project this
year after a federal appeals court last week ruled that the US government had
improperly relied on inadequate information in the process of awarding licences
for exploration in Alaska.
"The recent decision ... raises substantial obstacles
to Shell's plans for drilling in offshore Alaska," Shell said in a
statement accompanying the earnings release.
"As a result, Shell has decided to stop its exploration
programme for Alaska in 2014."
Chief executive Ben van Beurden expressed regret at the
situation.
"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," he said.
"We will look to relevant agencies and the court to
resolve their open legal issues as quickly as possible."
Shell revealed the news in a poor results statement that
also laid out plans to sell off $15 billion (11 billion euros) of assets over
the next two years.
Capital spending will also be reduced to $37 billion in
2014, from $46 billion in 2013.
"We are making hard choices in our worldwide portfolio
to improve Shell's capital efficiency", van Beurden added.
Two weeks after a profits warning, Shell confirmed that net
profits dived 39 percent to $16.371 billion in 2013, compared with $26.712
billion a year earlier.
Shell shocked investors earlier this month with its first
profit warning for a decade, blaming high exploration costs, pressures across
the oil industry and disruption to Nigerian output.
The group also confirmed on Thursday that profit on a
current cost of supplies (CCS) basis or current-cost accounting -- stripping
out changes to the value of oil and gas inventories -- sank to $16.7 billion
from $27.2 billion.
And CCS profit plunged by 70 percent to $2.2 billion in the
fourth quarter, or three months to December, compared with $7.4 billion in the
same part of 2012.
"Our momentum slowed in 2013. We must improve our
financial results, achieve better capital efficiency and continue to strengthen
our operational performance and project delivery," said van Beurden.
"Our overall strategy remains robust, but 2014 will be
a year where we are changing emphasis, to improve our returns and cash flow
performance."
Shell's 2013 performance was hit also by higher
depreciation, lower upstream volumes and weak industry conditions in downstream
oil products.
This month's surprise profits warning and dire results mark
a disappointing start to van Beurden's tenure as chief executive. The Dutch
national took over from Peter Voser on January 1.
But the markets responded well to Shell's announced actions,
with its B share climbing 1.07 percent to 2,266.5 pence.
The decision to halt Arctic drilling plans was hailed by
environmental groups.
"Shell is finally recognizing what we've been saying
all along, that offshore drilling in the Arctic is risky, costly and simply not
a good bet from a business perspective," Oceana's vice president for US
oceans Jacqueline Savitz told AFP.
Greenpeace International added: "Shell's Arctic failure
is being watched closely by other oil companies, who must now conclude that
this region is too remote, too hostile and too iconic to be worth
exploring."
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