Why does ‘Shell’ exits from Arctic?

I posted about current competition between countries over resources and trade routes in the Arctic few weeks ago. As a extensions of this article, I am going to handle the topic that why ‘Shell’ exits from Arctic even it has lots of potentiality in the future.

“These are not sufficient to warrant further exploration.”

Shell said that they believe Arctic is no more valuable to explore for the oil and gas. This is an unexpected announcement for me because I read the article that about 30% of natural gas, 20% of liquefied natural gas and 15% of world’s remaining oil are stored in the Arctic seabed. It is a massive amount that our human-being could use, and in case of Russia they put their flags under the Arctic to claim that its their territory.

The reason why they quit drilling in Arctic is Shell was disappointed at the result after drilling one well. It could be embarrassing to the U.S. because Royal Dutch Shell and environmentalists have been keep fighting against each other due to their different beliefs and the U.S. decided in the Shell’s favor. Royal Dutch Shell put $7 billion for oil search in Alaska but they believe they cannot meet the surplus with current situation.

In the Fearon’s 3 main point, the U.S. government decided to fight or at least ignore environmentalist’s argue because they believed war with environmentalist will bring huge benefits compare to cooperate and discuss with them. However, the situation that the government facing is keep changing as times goes by. For example, Royal Dutch Shell is not going to drill further at least as long as the oil prices remain near $50 per barrel. The U.S. government could thought that losing environmentalists support is not a big deal compare to the potential economic benefits of drilling Arctic.

I believe this circumstances shows that the condition of expected utility keep changes as time goes by. It shows that cooperation is hard to be made even it is not a conflict between the states. If I apply this situation to the real international conflict, I would say that deciding cooperation or having war could be change in every second depends on the world situation.

Also, I could expect that ‘Shell’ could re-drill in Arctic if they listen that other companies in the world found huge amount of oil that could cover every investment that they made and create huge amount of surpluses. So, I would like to say that current decision made by ‘Shell’ could be smart decision until they could find the hope of making surpluses.


3 thoughts on “Why does ‘Shell’ exits from Arctic?

  1. I find this topic extremely interesting because I feel that no one should be drilling in the Arctic. I also think that the US should start cooperating with environmentalist because they are not just in the US and will need their support down the road when the environment continues to get worse. How they are dealing with their relationship is definitely and example of the prisoners dilemma because they feel as of right now ignoring them and trying to get a hold of this territory and to drill will be better alternative and give them a better pay off then if they did the opposite but I feel like the opposite will give the better pay off because of what could go wrong with this territory since they don’t know what is there, what if they spend huge amounts of money and they find nothing or they create a mess that they can’t clean up or destroys the Arctic environment even more then if we had just left it alone.


  2. I, too, think the Arctic shoud be intact, but it’s impossible for ‘unmanageable’ human beings to do so. So be it; however, we need some rules and keep them in order that any country may not get a leg up to monopolize resources. In this regard, as the comments above says, U.S. may cooperate with environmentalists down the road.


  3. I agree that it will bring international conflict if the Arctic become embroiled in a territorial dispute. However, i believe the decision that US government made which allows Shell to drill in Arctic could be smart decision in economic view. If certain states find the resources ahead to the others they could have higher possibilities to argue that the resources are theirs. Also, even the territorial dispute occurs, they could ask for certain portion of the resources. I believe the conflict on Arctic will become bigger than now unless US and other states that are related to the Arctic re-freeze it.


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