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Shell Executive Managing Arctic Alaska Oil Program to Leave Company

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A Royal Dutch Shell PLC executive tasked with managing a controversial multi-billion-dollar oil exploration program in the U.S. Arctic Ocean that failed to complete any wells in last year's short drilling season is to leave the company by "mutual consent" later this year.

According to a Shell spokesman, David Lawrence, executive vice president responsible for exploration activity in the Americas, is to leave Shell mid-year. The spokesman didn't give details why Mr. Lawrence, who joined Shell in 1984, was leaving the company. Prior to his current post, Mr. Lawrence worked in exploration, development and strategy.

The personnel move is significant as Shell has staked a lot on its Arctic oil exploration plans, which form an important part of its strategy to seek out new reserves to replace declining production elsewhere. But the company's 2012 drilling season was marred by bad weather, mechanical failures and regulatory challenges, leading it to postpone drilling this year.

Shell's Arctic oil drilling experience is critical for other companies keen to tap some of the 90 billion barrels of oil the U.S. Geological Survey estimates the Arctic region may hold. They are closely watching Shell's Arctic efforts hoping to learn about the potential challenges they may face there.

ConocoPhillips is set to drill in the Alaskan Arctic next year. Elsewhere, Exxon Mobil Corp., Italy's Eni SpA and Norway's Statoil ASA have partnership agreements with Russia's OAO Rosneft to develop Arctic blocks. BP PLC is close to securing a long-coveted Russian Arctic oil deal with the Russian energy giant.

Green groups are fearful of the deleterious effect an oil spill in the pristine Arctic environment might have, while some investors say the potential cost to a company in fines and lawsuits if there was an accident outweigh the benefits of drilling.

The news about Mr. Lawrence's departure was first reported on the website of John Donovan, a blogger critical of the company.

It also comes as Shell has been conducting an internal review into what went wrong in its Alaska offshore drilling campaign last year. The U.S. Department of the Interior said last week that Shell had failed to prepare adequately for the 2012 drilling season, putting pressure on the company's operations and schedule. It also said in the review into the company's troubled effort that weak oversight of the contractors Shell relied on had led to many of the company's problems.

Shell will need to provide more detailed plans before it can resume its Alaskan offshore Arctic drilling program, the Interior Department said.

"Shell's difficulties have raised serious questions regarding its ability to operate safely and responsibly in the challenging and unpredictable conditions offshore Alaska," the report said.

Last month, Shell that it would "pause" its exploration drilling activity in Alaska's Beaufort and Chukchi Seas for 2012 to prepare equipment and plans.

Shell has spent more than $5 billion so far on permits, personnel and equipment to prepare for the 2012 drilling season. But the venture was beset by problems before it even began: Drilling was delayed by lingering sea ice, one drill ship almost ran aground, a second rig was damaged while being towed during a storm and an oil spill containment system was damaged in a test.

Copyright (c) 2012 Dow Jones & Company, Inc.

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