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Shell Intends to Resume Drilling in Arctic, Submits Plan

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Royal Dutch Shell plc (RDS.A - Free Report) , the European oil major, submitted a revised Artic offshore drilling plan to the federal regulator, Bureau of Ocean Energy Management, with the intention of resuming oil exploration activities in the Arctic, off the Alaskan coast. Though the company has not confirmed its decision to start drilling next year, it stated that the filing keeps the option open.

According to the filing, Shell intends to simultaneously operate two drilling vessels – Noble Corp.’s (NE - Free Report) Noble Discoverer and Transocean Ltd.’s (RIG - Free Report) Polar Pioneer – in the Chukchi Sea and drill up to six wells in the region in due course. Drilling at Chukchi Sea would prove favorable for the company as the region is expected to yield over 400,000 barrels of oil a day.

Apart from the necessary regulatory approvals, Shell will also require clearance from the federal court that had ruled that the Chukchi leases had been sold without proper environmental review.

Shell’s Arctic drilling operations are on hold since 2012 when the company ran into problems due to challenging weather conditions.

While Shell ensures it is taking methodical safety measures before starting operations in the harsh conditions, several environmentalists opine that the resumption of drilling activities would pose a threat to not only the people but also the environment at large.

Shell has already invested around $6 billion in the Arctic region but has not attained any fruitful result. In 2012, Shell drilled two shallow wells in the region but did not get permission from regulatory bodies to drill deeper to reach the oil-bearing formations due to lack of necessary equipments. Following Shell’s problems, other oil majors like ConocoPhillips and Statoil ASA (STO - Free Report) also halted operations in the Arctic region.

The Alaskan Arctic is a promising region with huge untapped potential. However, aging fields and lower investments have led to production declines in the region. Moreover, as the region remains covered with ice for most part of the year, it allows only a small time frame of operation for oil explorers.

Shell is a major integrated energy firm with a large and diversified portfolio of development projects that offer attractive long-term opportunities. Currently, Shell has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. market in the next one to three months.

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