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Shell Takes a 'Gap Year' Break From Oil Exploration in the Arctic, but What of 2014?

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The Kulluk and Discoverer drill ships are being towed to Asia for repairs and renovations in a "pause" that may give ground to environmental groups.

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Greenpeace and Other Environmental Groups

On the other hand, Greenpeace is taking this "pause" as a victory on the path to an oil rig-free Arctic Circle.

In an official media response to the news, Greenpeace USA's Executive Director, Phil Radford, had this to say:

This is the first thing Shell's done right in Alaska -- calling it quits. Shell was supposed to be the best of the best, but the long list of mishaps and near-disasters is a clear indication even the "best" companies can't succeed in Arctic drilling. Secretary Salazar and President Obama gave drilling a chance; now the responsible decision is to make Arctic drilling off limits, forever.

He cites the difficulty of working in the Arctic as a reason for Shell's newly announced gap year, but later goes on to address the world's dependency on fossil fuels and how detrimental that is to the environment.

With so much upside potential in the Arctic, it seems unlikely that pressure from environmentalists played a major part in the decision to halt drilling. Rather, the sheer difficulty and hazards of doing so proved to be, for now, too great.

From another environment group, Oceana, the senior Pacific counsel Michael LeVine has said, "The decisions to allow Shell to operate in the Arctic Ocean clearly were premature…The company is not prepared and has absolutely no one but itself to blame for its failures." Echoing that sentiment, Lois Epstein, Arctic program director for the Wilderness Society stated, "Shell's managers have not been straight with the American public, and possibly even with its own investors, on how difficult its Arctic Ocean operations have been this past year."

What Can We Expect After 2013?

Despite their differences, both sides can agree on one thing: Drilling for oil in the Arctic Circle is really hard to do. That being said, with a potential 18.7 billion barrels of oil in the Arctic seas, not to mention all the natural gas, it seems like Shell and its brethren will fight hard to find a way to safely drill for oil in the area. Will Shell's "gap year" give environmental groups a chance to make their case against Arctic drilling and influence legislation? Or will the ships go to Asia and come back in 2014 for business as usual? With the world's current dependence on fossil fuels, plus ConocoPhillips' plans to begin exploration in 2014, it seems as though the latter is more likely.

Follow me on Twitter: @JoshWolonick and @Minyanville
No positions in stocks mentioned.
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