Thunderbird Case

Home / Faculty & Research / Global Business Cases & Notes / Id / Shell and the Arctic
Case #: 
A09-15-0004

Fields:

Author(s):

Abstract: 

In 2005, Royal Dutch Shell (Shell) invested in oil exploration leases in the Beaufort Sea in the Alaska Arctic. A few years later, additional leases were acquired in the nearby Chukchi Sea. After years of delays, Shell began drilling in the summer of 2012 with two drillships. More delays and the short drilling season resulted in only two partially drilled wells. On the journey south after drilling was completed, one of the ships had an engine fire and the other one ran aground. The Kulluk, the drillship that ran aground, was eventually scrapped. After spending more than $5 billion on its Arctic exploration program between 2005 and 2015, the company had very few results for its efforts, raising questions about Shell's and the industry’s ability to manage large complex oil and gas projects in the Arctic.

Teaching: 
The oil and gas industry is capital and technologically intensive, and Shell’s experience demonstrates that even after spending billions of dollars there can be limited tangible results. This case allows the instructor to discuss how the upstream oil and gas industry works and the risks associated with complex exploration projects in areas such as the Arctic. The pros and cons of the oil and gas industry in the Arctic should create a good discussion. The case also provides a foundation for discussing risk assessment and management. Did Shell do adequate risk assessment of the entire project and, more specifically, of the towing plan that resulted in the grounding of the Kulluk? The instructor could also use the case to discuss industrial accidents and their root causes. Shell had several near misses in the project, such as the near grounding of the Noble Discoverer drillship. The near misses could have been indicators of problems with the overall project, which raises questions as to how they should have been interpreted and incorporated into Shell’s risk assessment.
Year: 
2015

Industry:

Setting: 
The Arctic
Length: 
17 pages
Source: 
Library

Subject: