Protecting the Arctic

Written evidence submitted by Shell International Ltd


1. The energy challenge, based on population forecasts and economic growth, clearly demonstrates the need for continued investment in all viable energy sources, including oil and gas. Over time, renewable energy sources such as biofuels, wind power and solar energy will make larger contributions. But the world cannot rapidly switch to renewables while maintaining growth and standards of living. As conventional oil and gas production declines, we will need to address exploration and development in both unconventional resources and in new locations such as the Arctic in order to meet the world’s energy needs. The Arctic holds some 22% of yet to be discovered global oil and gas resources, equivalent to some 400 billion barrels, mostly located offshore (84%). If developed responsibly, Arctic energy resources can therefore help offset supply constraints and maintain energy security for consumers throughout the world.

2. The Arctic is a unique environment that poses special challenges in terms of biodiversity and the impact of climate change, sea ice and indigenous peoples with their traditional lifestyles. All these challenges need to be addressed in support of our "license to operate", together with the need to develop the trust of our stakeholders and address regulatory issues. We must carefully manage industry impact on the Arctic environment and its inhabitants, notably the potential risk of oil spills. As an industry, we need to operate to the highest standards. Underpinning these high standards must be an intense focus and commitment to safety and the environment, as this is a direct reflection of the health of our business. We recognize that the industry’s "license to operate" depends on its ability to work in a safer and environmentally responsible way.

3. Shell has operated in Arctic and subarctic conditions for decades, giving us the technical experience and know-how to explore for and produce oil and gas responsibly and safely. Shell is also a pioneer and industry leader in the development of energy resources from deepwater. Our global portfolio of large-scale projects, combined with rigorous safety standards, demonstrates our ability to meet technical, engineering and operational challenges in some of the world’s toughest and most complex environments.

4. Shell has built up extensive operating and development experience in the Arctic and sub-Arctic regions. We have been active onshore and offshore Alaska and Canada for nearly 50 years. Our growing Arctic and sub-Arctic portfolio ranges from Shell’s partnership in the flagship Sakhalin II project that produces large quantities of oil, condensate and LNG to world class exploration acreage in the Alaskan offshore continental shelf, active exploration acreage in the Baffin Bay in the north west of Greenland and opportunities for significant expansion in Russia. We continue to look at attractive new exploration opportunities in the Arctic.

5. We have long recognised that the Arctic is one of the most challenging areas in the world to work in, not only because of the technical challenges it poses but also due environmental and social risk. To address these challenges, we work with third parties, including our strategic environmental and community development partners, who advise us on our projects and take lead positions in industry associations to raise the bar for Arctic operating standards. Shell has set up a pan-Arctic Theme Group that deals with these issues together with a large group of Arctic practitioners in Shell around the globe and through third parties in order to build a foundation underpinning a successful Arctic business. We likewise actively engage and work with workgroups of the Arctic Council to provide industry specific expertise in their many global assessment studies and promote global co-operation in science projects.

Footprint of Operations

6. Operating safely and reliably in the Arctic is key to the way we work. Each step of every oil and gas development and operation in the Arctic – from seismic activities to exploration drilling, planning and finally engineering, construction and installation – must be sensitive to the physical environment and the needs of the Arctic inhabitants. Challenges include limited open-water seasons, winter darkness, remoteness and a wide variety of ever-changing ice and climate conditions. Safety, reliability, and cost effectiveness remain at the forefront of our technology development and deployment effort.

7. Advancing oil spill prevention and response (OSPR) capability in ice is the number one priority in terms of technology, operations and reputation for both Shell and the industry in the Arctic. Our whole approach to offshore drilling is based on preventing any incidents that could cause marine pollution. Shell applies a multi-layered well control system designed to minimise risks, so if any one system or device fails it should not lead to a blowout.

8. At Shell, these barriers are regularly audited and tested. In Alaska, Shell has a three-tier system to respond to offshore, near-shore and onshore/shoreline spills with qualified personnel that conduct drills regularly. The response system consists of dedicated oil spill response assets that are available at an hour’s notice, 24 hours a day. The response options include burning, use of dispersants and mechanical removal. Joint industry research (carried out by SINTEF of Norway), including field testing in Svalbard, has proved the effectiveness of all of these methods and shown that there are better ways of detecting oil by means of airborne radar. Research is ongoing to further improve these methods.

9. Shell is also building a subsea capping system that involves capturing hydrocarbons at source in the unlikely event of a well control incident in the shallow waters of Alaska and that will be ready for the 2012 Alaska drilling season. This subsea capping and containment system will be tested and deployed in open water prior to drilling as a condition of any potential oil spill response plan approval. We will not be working in ice so testing the system in those specific conditions will not be useful or practical.

10. Shell has been at the forefront of research and development activities involving the removal of spilled oil from solid landfast ice and broken ice.  Shell is recognized as a leader in advancing technologies in response techniques and equipment for the effective removal and combustion of spilled oil under arctic conditions, and continues to work with government, industry and academic organizations to validate and enhance these response capabilities

Response Options

11. We recognize that there are challenges in dealing with any response to an oil spill in the Arctic - remoteness, low temperatures, seasonal darkness, and the presence of ice all have an impact on the effectiveness of options in the spill response toolkit.

12. Research indicates that oil spills in broken ice can best be handled through the careful consideration of all response options, including mechanical recovery, controlled burning, and the application of non-toxic chemical dispersants.   Low oil encounter rates in moderate to heavy ice concentrations can be offset by burning large quantities of oil quickly and efficiently between ice cakes, and by applying dispersants where subsurface impacts are minimal and conditions are right for good mixing, degradation and dilution.

13. Arctic conditions create differences in responding to oil in cold and ice conditions. Differences in evaporation rates, viscosity and weathering provide greater opportunities to recover oil.   Recent independent tests in arctic conditions have show us that the ice can aid oil spill response by slowing oil weathering, dampening waves, preventing oil from spreading over large distances, and allowing more time to respond.

14. Mechanical Recovery

· In Alaska, Shell’s on-site, near shore and on-shore oil spill response assets include ice class booms, vessels, skimmers and workboats with a combined capacity that exceeds the worst case discharge potential of the well we are drilling.

15. In-Situ Burning

· One of the options for recovering oil in the Arctic is the use of in-situ burning. When fresh oil reaches the water’s surface, burning has proven a very efficient way to eliminate the vast majority of it. The thicker and more concentrated the oil, the better the recovery rate. Shell will have on-site special igniting systems and booms that can withstand the intense heat crated by this burning.

· A large scale SINTEF study conducted in 2009 study tested burning and containing techniques in 70-90% ice cover.  Burn efficiency of the large scale field test was estimated at over 90%.

16. Dispersants

· Laboratory and field tests demonstrate that oil can be effectively dispersed even in cold Arctic waters. While dispersant use is not pre-approved for use in the Arctic, it is approved on a case-by-case basis by the (state) on-scene coordinator after an assessment of conditions has been made.

17. Relief well

· A relief well is a separate well that intercepts the original well, adding pressure and flow control. In Alaska the relief well could begin immediately as all of the equipment, including extra pipe, casing and a second BOP will already be staged onboard the drilling rig. Because the drill rig can no longer float above the original wellhead, the relief well must be drilled at an angle. Directional drilling is a common procedure and can be done with precision.

· If for some reason the original drill rig can is not able to drill a relief well, Shell has committed to having a secondary relief well rig and ice-management vessel nearby that will be mobilized.  In 2012, with Shell planning to have a rig in both the Chukchi and Beaufort Seas, this second rig will cease work on its own well and immediately mobilize to assist.

18. In the unlikely event of a leak Shell has the capability to track oil under ice. Technology for detection and monitoring of oil under ice is available now and being enhanced. This includes ice strengthened beacons designed to track the location of oil and a number of remote sensing techniques including Ground Penetrating Radar (GPR), laser fluorosensors, enhanced marine air-borne radar, and satellite imagery. Underwater autonomous vehicles (AUV’s) can also aid in locating and tracking oil under ice.

19. Shell is also leading and participating in a recently launched joint industry project, aimed at continued research into oil spill response in ice. This four year, multi-million dollar collaborative research endeavour will expand industry knowledge of, and capabilities in, Arctic oil spill prevention and response. Nine major oil companies are sponsoring the programme: BP, Chevron, ConocoPhillips, Eni, ExxonMobil, North Caspian Oil Company, Shell, Statoil, and Total.

Science-based approach

20. Shell favours a science based approach and ecosystem based management (EBM) with respect to possible impacts of its oil and gas operations on the environment. Arctic-specific challenges to Arctic development require comprehensive science programs. It’s critical that the scientific building blocks be solidly in place - not just to understand what’s happening in the Arctic today, but to better measure historical trends and assess how oil and gas activity can co-exist with a subsistence culture and Arctic communities that have thrived for centuries.

21. Our philosophy is to carry out integrated research that includes zoology, sediment sampling, benthic studies, water column studies, including food web systems that support marine mammals. This gives us a unique understanding of this ecosystem. Since the early 1970’s, thousands of independent scientific studies have been completed in the Arctic and with continued interest from companies like Shell, that number will continue to grow. So too will the scientific story that makes the Arctic one of the most unique regions on earth. In Alaska for instance the Regulator and Industry have spend more than $500 mln on science in preparation for oil and gas in the Offshore Continental Shelf (OCS).

22. With respect to basic scientific information, numerous significant studies programs have been implemented in the U.S. Arctic offshore that have contributed to the understanding of the marine ecosystems of the Chukchi and Beaufort Seas. In the last several decades, the frequency and intensity of these studies has increased in response to concerns related to climate change and efforts to understand potential effects of energy development. Such research funding initiatives and Industry Joint Studies Programs have generated large amounts of data on physical oceanography, acoustics, and most tropic groups on both intensive local and broad area scales.

23. Shell has and continues to commit significant amounts of time and resources toward understanding baseline environmental conditions. Since 2006, in Alaska, we have collaborated with other members of the oil and gas industry, academic institutions, government agencies, and a non-government organization to establish a comprehensive science program in the Arctic. The goal of the program is to develop the scientific studies and monitoring programs necessary for collecting information about the environment and the subsistence lifestyles that are unique to the Arctic.

24. Shell’s research in the Alaska offshore is groundbreaking and will provide scientific building blocks for generations to come. There are a number of ongoing research projects taking place in both the Chukchi and Beaufort Seas, and all of it is especially exciting because it is "first-of-its-kind" research:

· Acoustic arrays in both Chukchi and Beaufort Seas;

· Walrus tagging program with US Geological Survey (USGS);

· Use of aerial drones to ID marine mammals

· Ice gouge and strudel scour surveys;

· Coastal stability;

· Water quality, sediment chemistry samples; and

· Benthic Community Analyses

25. There are clear distinctions between the scientific needs for an exploration program and a development and production program. The former is a temporary, short-term operation.The wealth of data on the Arctic OCS is more than sufficient to support the current level of industry activity in Alaska. If a commercial discovery is made, any subsequent development and production activities will build on the information gathered through the exploration stage. The first development in the Arctic OCS will require the preparation of an environmental impact statement.

26. Although we have made significant improvements to our operational efficiency already, we must continue to develop the technologies that reduce our operating footprint and impacts, and reduce exposure of people to the harsh Arctic environment. As indicated below there are many examples of footprint reduction in each phase of the operation:

· We continue to research the use of unmanned aircraft for observation of marine mammals and ice conditions, Autonomous underwater vehicles for sea bottom inspection and ice thickness measurement.

· Where practical, we run seismic-on-ice surveys to avoid the open water marine environment.

· We are at the forefront of developing seismic-under-ice solutions that rely on remotely targeted self propelled nodes.

· We make use of Real Time Operating Centres to support drilling operations for every Arctic well.

· Deploying the latest subsea technology for subsea-to-beach development concepts (as in Ormen Lange) supported by remote subsea operations and maintenance is key to developing solutions for arctic development.

· We reduce discharges from drilling and production operations to as low as reasonably practicable on the basis of both net environmental impact analysis and stakeholder needs and ensure the burial of subsea pipelines beyond iceberg scouring depth.

· We carry out extensive monitoring of underwater sound to understand the behaviour of marine mammals in polar and cold-water areas.

· We continue research to develop quiet offshore drilling rigs, for example by installing bubble curtains

Regulatory Framework and Standards

27. A modern and stable energy strategy, fiscal policy and regulatory framework are needed to create a platform for stable long-term investment in energy projects in the Arctic.

28. Preference is given to a general framework for the phased implementation of performance based standards governing Arctic offshore oil and gas exploration, development, production and transportation, which takes into consideration the special challenges of the Arctic environment and enables compliance to be integrated with the regulatory arrangements for each Arctic state.

29. At Shell we choose to enhance operating standards by working with government agencies and trade associations such as the International Association of Oil and Gas Producers (OGP) or via the Barents 2020. The project started as a bilateral cooperation agreement between Norway and Russia but is now a truly global project, covering the design of offshore structures, risk management, escape evacuation and rescue and human health in the Arctic. Only through co-operation with key stakeholders and a mature and robust debate with the regulator can we arrive at a leading set of performance standards, moving away from prescriptive and inflexible oil and gas regulations.

30. Shell actively contributes to and promotes international co-operation on standards frameworks that guide responsible activities in the Arctic. We play a leading role in industry in the development of Arctic standards. This effort ranges from chairing industry association committees in the OGP, the global Arctic Oil Spill Response Technology Joint Industry Program and the Subsea Well Response Group to key roles in the International Standards Organization (ISO).

Working with others

31. We work closely with external global stakeholders to support our Arctic strategy and build the foundation underpinning a successful Arctic business.

32. Our current and potential partners consist of NGOs, academics and experts, Arctic government representatives and industry bodies, all of which are essential not only to address concerns about our operations, but to deal with wider environmental and social issues in the Arctic. Examples of specific Arctic projects with environmental strategic partners include "Ecosystem based management approaches" and "Cross-sector impact assessment" with IUCN, "Impact on and recovery of Arctic wetlands" with Wetlands International, and fellowships in programmes such as "Climate Change at the edge of the Arctic" with Earthwatch.

33. Shell has been an active participant in the Aspen Institute’s Arctic Climate Change Commission. This commission has delivered Arctic governance principles and a series of powerful recommendations on global co-operation in science, sustainable development planning, industry standards, participation of indigenous peoples of the North and strengthening of the Arctic Council (AC). The latter has been set in motion already with the recent Arctic Council Ministerial meeting in Nuuk, Greenland, which concluded in a binding Search and Rescue Agreement, a permanent Secretariat of the Arctic Council in Norway, and the need for a taskforce for global co-operation on Oil Spill Response in the Arctic.

34. Shell plays the lead role in the Arctic Task Force in OGP that pulls together industry best practices, advocacy and relevant standards. OGP has applied to the Arctic Council for observer status, and it is believed that the request will be granted in 2013. Shell has been invited to AC workgroup events to provide industry expertise on oil spill response and environmental guidelines.

Conclusions & Recommendations

35. Developing the Arctic has significant environmental challenges but Shell believes these challenges can be managed with the right approach to safety and to sustainability. With energy demand rising, all resources must be developed to help meet it – including the Arctic. Shell’s principles are underpinned by a deliberate focus on safety and the environment, continuous improvement, collaboration with regulators and engagement with local communities where we strive to be open and transparent.

36. What is needed from governments, agencies and regulators;

· Provide clear, consistent and effective regulations, performance standards

· A stable energy strategy and fiscal policy to create a platform for long-term investment in energy projects in the Arctic.

37. And from industry;

· Effective collaboration with communities, governments, regulators, industry partners and other stakeholders to drive common shared solutions for harmonized standards.

· Establish common views and standard practices on sustainable development and the application of appropriate science as a basis for decision-making

· Early and effective stakeholder engagement to encourage greater public involvement in order to avoid conflict and achieve acceptability.

· Clearly demonstrate that the industry is proactively pursuing the implementation of the "Macondo" learnings in terms of oil spill prevention and response, and following up recommendations and building industry-wide capacity in order to be prepared for the unlikely event of an Arctic well control incident.

16 February 2012

Prepared 24th February 2012