Shell CEO Defends Arctic Drilling, Environment Record
Climate change dominates oil company’s annual shareholder meeting
Shell CEO Ben van Beurden is the latest oil-industry executive to face investors’ questions over environmental policies. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES
By
SARAH KENTMay 19, 2015 3:12 p.m. ET
THE HAGUE— Royal Dutch Shell PLC’s chief executive on Tuesday defended the company’s environmental record as its board was peppered with questions about plans for Arctic exploration and the risks climate change poses to its business.
In the company’s first annual shareholder meeting since it announced its planned tie-up with British energy company BG Group, the climate issue took center stage, overshadowing the $70 billion deal announced in April. It took place after Shell’s Arctic-bound vessels were met with kayak-borne protests in Seattle last week. Fossil-fuel companies are coming under scrutiny ahead of climate-change talks in Paris later this year.
CEO Ben van Beurden said the company was the first in the industry to acknowledge a link between carbon-dioxide emissions and climate change.
“We have thought through a fairly pragmatic strategy to position your company with the long-term energy transition that is currently under way,” Mr. van Beurden said.
On the Arctic, Mr. van Beurden said Shell was managing the risks of Arctic drilling “down to the levels that we think are acceptable and indeed negligible.”
Mr. van Beurden is the latest oil-industry executive to face questions over the environment.
Exxon Mobil Corp. CEO Rex Tillerson told the Associated Press last month that world energy demand requires fossil-fuel companies to keep looking for new resources, or “everybody’s lights would be going off before not too long.” BP PLC Chairman Carl-Henric Svanberg told investors last month that “fossil fuels will be part of a balanced, sustainable energy mix for many decades to come.”
The investor concerns highlight the challenges Shell faces as it seeks to position itself as a greener, gas-focused energy company. Its tie-up with BG would give it a dominant position in liquefied natural gas, which is cleaner-burning than oil.
But Shell is also doing some of the most environmentally sensitive drilling work in the world, from Canadian tar sands to the Nigerian Delta. At the heart of that tension sits the company’s controversial plans to drill for oil in the Arctic this summer.
Investors entering Shell’s meeting in The Hague were greeted by protesters dressed in a life-size polar-bear costume. The annual gathering was heralded by a flurry of news releases sent out by environmental groups protesting the company’s Arctic drilling plans.
“There’s a complete disconnect between Shell’s words and actions on climate change,” said Louise Rouse, a consultant for Greenpeace, the environmental group, and a Shell shareholder. “It’s as if a transition to a low-carbon economy can be accommodated to oil companies. Climate change isn’t going to wait for oil companies to be ready.”
Shell’s previous experience in the Arctic in 2012 was plagued with missteps. After paying more than $2 billion to the federal government to obtain Arctic licenses, Shell had to stop drilling early because of sea ice. On its way back to port, one of the company’s rigs ran aground, resulting in U.S. government fines for Clean Air Act violations.
Shell still requires a number of legal permits to get the final green light to resume exploration in the Arctic, but this time the company insists it has taken adequate precautions, upgraded its fleet and rigorously tested its oil-spill response mechanisms.
“The multiple layers of defense that we have are unprecedented,” Mr. van Beurden said. “Nowhere ever in the industry have there been such precautionary measures to make sure a spill cannot and will not happen.”
The scrutiny comes as activists, government officials and business leaders focus on the issue of climate change ahead of a United Nations conference on carbon emissions in Paris this year.
Investors are now considering the possibility that companies involved in extracting fossil fuels may find some of their prize assets worthless in the future if new climate-change rules and regulations on carbon emissions are brought in to ensure global warming stays within the two-degree limit advocated by the U.N.
It is a theory that Mr. van Beurden said “ignores reality” and distracts from the issues global energy markets face to meet growing global consumption over the coming years, particularly from emerging markets.
“If there would be no further investment in oil production the gap between supply and demand could be 70 million barrels per day by 2040,” Mr. van Beurden said. “Energy demand will continue to grow and that will have to be by and large met by fossil fuels,” he added.
Longer term, Shell is positioning itself to be at the forefront of a transition to a lower-carbon world and says it is up to the challenges presented by climate change. It has called for government-controlled limits on carbon emissions and is focusing investment on lower-carbon fuels such as gas and helping to develop carbon-capture storage technology.
Shell CEO Ben van Beurden is the latest oil-industry executive to face investors’ questions over environmental policies. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES
By
SARAH KENTMay 19, 2015 3:12 p.m. ET
THE HAGUE— Royal Dutch Shell PLC’s chief executive on Tuesday defended the company’s environmental record as its board was peppered with questions about plans for Arctic exploration and the risks climate change poses to its business.
In the company’s first annual shareholder meeting since it announced its planned tie-up with British energy company BG Group, the climate issue took center stage, overshadowing the $70 billion deal announced in April. It took place after Shell’s Arctic-bound vessels were met with kayak-borne protests in Seattle last week. Fossil-fuel companies are coming under scrutiny ahead of climate-change talks in Paris later this year.
CEO Ben van Beurden said the company was the first in the industry to acknowledge a link between carbon-dioxide emissions and climate change.
“We have thought through a fairly pragmatic strategy to position your company with the long-term energy transition that is currently under way,” Mr. van Beurden said.
On the Arctic, Mr. van Beurden said Shell was managing the risks of Arctic drilling “down to the levels that we think are acceptable and indeed negligible.”
Mr. van Beurden is the latest oil-industry executive to face questions over the environment.
Exxon Mobil Corp. CEO Rex Tillerson told the Associated Press last month that world energy demand requires fossil-fuel companies to keep looking for new resources, or “everybody’s lights would be going off before not too long.” BP PLC Chairman Carl-Henric Svanberg told investors last month that “fossil fuels will be part of a balanced, sustainable energy mix for many decades to come.”
The investor concerns highlight the challenges Shell faces as it seeks to position itself as a greener, gas-focused energy company. Its tie-up with BG would give it a dominant position in liquefied natural gas, which is cleaner-burning than oil.
But Shell is also doing some of the most environmentally sensitive drilling work in the world, from Canadian tar sands to the Nigerian Delta. At the heart of that tension sits the company’s controversial plans to drill for oil in the Arctic this summer.
Investors entering Shell’s meeting in The Hague were greeted by protesters dressed in a life-size polar-bear costume. The annual gathering was heralded by a flurry of news releases sent out by environmental groups protesting the company’s Arctic drilling plans.
“There’s a complete disconnect between Shell’s words and actions on climate change,” said Louise Rouse, a consultant for Greenpeace, the environmental group, and a Shell shareholder. “It’s as if a transition to a low-carbon economy can be accommodated to oil companies. Climate change isn’t going to wait for oil companies to be ready.”
Shell’s previous experience in the Arctic in 2012 was plagued with missteps. After paying more than $2 billion to the federal government to obtain Arctic licenses, Shell had to stop drilling early because of sea ice. On its way back to port, one of the company’s rigs ran aground, resulting in U.S. government fines for Clean Air Act violations.
Shell still requires a number of legal permits to get the final green light to resume exploration in the Arctic, but this time the company insists it has taken adequate precautions, upgraded its fleet and rigorously tested its oil-spill response mechanisms.
“The multiple layers of defense that we have are unprecedented,” Mr. van Beurden said. “Nowhere ever in the industry have there been such precautionary measures to make sure a spill cannot and will not happen.”
The scrutiny comes as activists, government officials and business leaders focus on the issue of climate change ahead of a United Nations conference on carbon emissions in Paris this year.
Investors are now considering the possibility that companies involved in extracting fossil fuels may find some of their prize assets worthless in the future if new climate-change rules and regulations on carbon emissions are brought in to ensure global warming stays within the two-degree limit advocated by the U.N.
It is a theory that Mr. van Beurden said “ignores reality” and distracts from the issues global energy markets face to meet growing global consumption over the coming years, particularly from emerging markets.
“If there would be no further investment in oil production the gap between supply and demand could be 70 million barrels per day by 2040,” Mr. van Beurden said. “Energy demand will continue to grow and that will have to be by and large met by fossil fuels,” he added.
Longer term, Shell is positioning itself to be at the forefront of a transition to a lower-carbon world and says it is up to the challenges presented by climate change. It has called for government-controlled limits on carbon emissions and is focusing investment on lower-carbon fuels such as gas and helping to develop carbon-capture storage technology.
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