Science & Environment

Shell Arctic drilling 'risky' - ex-BP boss Lord Browne

Lord Browne addresses an audience at the Royal Society of Arts in 2014 Image copyright Getty Images
Image caption Lord Browne said one of the costs of drilling would be the company's long-term reputation

Drilling for oil in the Arctic may harm Shell's reputation and cost it dear, the former BP boss Lord Browne has said.

Shell has just started preliminary drilling in Alaska’s Chukchi Sea after several setbacks.

The firm’s CEO Ben van Beurden said he had gone on a “personal journey” before deciding the risks were containable.

But Lord Browne urged caution, saying the company's long-term reputation could be affected.

Image copyright Getty Images
Image caption Lord Browne admitted company boards would not prioritise a pristine Arctic over the search for oil

Both men have given interviews to the BBC for a Radio 4 documentary series in the autumn - Climate change: Are we feeling lucky?

Lord Browne told the BBC: “I’m not chairman of Shell. But I think [Arctic drilling] is very expensive and I would always go for hydrocarbons which have less cost and effort involved.

“Some companies will genuinely believe - they may be right - that they can produce oil safely and environmentally securely in extraordinary conditions.

“[But] I’ve never been a great supporter of right-on-the-margin development, partly because of the cost.

"So I think you’ve got to be careful what you do and cost includes your long-term reputation.”

Lord Browne – now chairman of L1, a new Russian-backed oil firm - agreed that oil and gas companies were typically staffed by techno-optimists.

He said it was essential for the boards of big oil firms to include members with a wide range of social backgrounds so the firms kept their “social licence” to operate.

But he admitted that at the moment company boards would not prioritise a pristine Arctic or a stable climate over the search for oil.

Mr van Beurden said: “The drilling in the Arctic comes with an increased risk profile and that is because the environment is much more fragile than other environments.

“It is also much more unforgiving in terms of climate, weather, etc. It is also, by the way, the particular reservoir that we are going to explore in, one that is - from a technical perspective - relatively easy. So you have to make a judgement: ‘Can I do this in a responsible way?’.

“That is a bit of personal journey that I had to go through as well and many others associated with the project - we believe that we can responsibly explore for hydrocarbons in Alaska.

"Whether that means that we can develop this in a way that makes commercial sense remains to be seen.”

Asked if he accepted that he could be remembered as the CEO who led Shell into a calamitous mistake that closed down Arctic drilling, he said: “If you are in our industry there are always significant risks that you have to worry about and therefore you have to have a very, very strong risk management framework, a very, very good risk management culture and an open and transparent dialogue within the company about what are the risks that you take on.

Image copyright Getty Images
Image caption The green light for Arctic oil exploration from the US in May was met with protests from environment campaigners

“There is no such thing as a risk-free world, so I cannot eliminate the risk altogether, but I can bring it back to something that I think is appropriate and manageable.”

Greenpeace director John Sauven said: "It's been like Keystone Cops for Shell up there [in the Arctic], hasn't it?

"They've had drill ships run aground, an oil containment dam crushed like a beer can, a towline snapped... Nothing of what they have done over the past couple of years would give you any kind of guarantee that they could drill safely for oil in the Arctic."

Follow Roger Harrabin on Twitter @RHarrabin

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