To be published as HC 1739-iv

House of commons



Environmental Audit Committee

Protecting the Arctic

Wednesday 14 March 2012

Professor Julia Slingo OBE

Richard Heaton, Peter Velez and Robert Blaauw

Evidence heard in Public Questions 113 - 231



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Oral Evidence

Taken before the Environmental Audit Committee

on Wednesday 14 March 2012

Members present:

Joan Walley (Chair)

Peter Aldous

Neil Carmichael

Martin Caton

Katy Clark

Zac Goldsmith

Mark Lazarowicz

Caroline Lucas

Caroline Nokes

Mr Mark Spencer

Paul Uppal

Dr Alan Whitehead


Examination of Witness

Witness: Professor Julia Slingo OBE, Chief Scientist, Met Office, gave evidence.

Q113 Chair: I would like to begin by thanking you for coming along today, Professor Slingo, and also to say how much we appreciated your hosting of our visit down to Exeter some months ago now.

Professor Slingo: My pleasure.

Q114 Chair: We are very pleased that you are here before the Committee. We will be having a second session directly after yours, and perhaps it will be helpful for you to know that we aim to finish at 3.00pm and move on to our next set of witnesses. To commence our session this afternoon, we are very pleased that you provided us with the draft version of your report, Possibility and Impact of Rapid Climate Change in the Arctic. To begin with, just briefly, there is some debate as to when the Arctic will be ice free in summer. When, in your view, do you think that that is likely to happen?

Professor Slingo: Our assessment, based on the latest climate model simulations that have been performed for the Fifth Assessment Report, suggests some time between 2030 and 2080. Our own model would say between 2040 and 2060, and it is fair to say that our view is that the earlier dates-in other words, the more pessimistic outlook for the Arctic-are associated with models that we believe are more credible, in terms of their capability to reproduce the observed seasonal cycle in sea ice extent, and also the variations in sea ice from year to year. Our expectation is certainly not in the next few years, as I think you have heard from some evidence, but within, say, 2025 to 2030 would be the earliest date.

Q115 Chair: You would rule out an icefree summer by as early as 2015, for example?

Professor Slingo: Yes we would, based on our understanding of the science and the complex interactions within the Arctic between the ocean, the atmosphere and the cryosphere.

Q116 Chair: In terms of the report that you have, and what you have noted about the rate of melting and how it has increased since 1995, do you think the rate of melting is likely to increase further?

Professor Slingo: We have to be very careful on the use of the word "melting". What we have seen is a reduction in the extent of sea ice, particularly since 2007 in the summer. We know that the large reduction in 2007 was associated with anomalous atmospheric circulations over the Arctic, with very strong northerly winds blowing through the Baring Strait, which acted to advect the ice away from the Baring Strait and into other parts of the Arctic, so it was not that the ice was melted, it was actually advected. I think it is really important to make that distinction-that there are a number of factors that influence the extent of Arctic sea ice, some of them of course associated with changes in the radiative forcing from the atmosphere, as a result of anthropogenic greenhouse gases and aerosols, but also changes in the atmospheric circulation and also the advection of heat into or out of the Arctic by the ocean circulation.

Q117 Chair: We will come on to a little bit more detail about the modelling. In terms of the modelling that you are using, does that cover the issue of the volume of ice and the decline that there has already been in the volume of ice, and how is that integrated into the modelling patterns that you use?

Professor Slingo: We run quite a sophisticated sea ice model that includes the volume of ice, and it is fair to say, yes, there is a decline in the volume of ice. The observational estimates are still very uncertain, and we are looking forward now to the new measurements from CryoSat-2, which will give us a much better sense of the thickness of ice around the Arctic as opposed to just the extent of ice.

Q118 Chair: One lot of evidence that we had suggested that the volume of ice had already declined by 75%, and that further decreases may cause an immediate collapse of ice cover. Would you recognise that? Would you give credence to that?

Professor Slingo: No, I wouldn’t. We don’t know what the thickness of ice is across the whole Arctic with any confidence. We know that the sea ice extent has declined annually by 4% per decade, and in summer, yes that the sea ice is declining at a faster rate of 12% per decade. You also have to understand that it recovers pretty well as we go back into winter, so the 4% per decade annually is still there. We know there is some thinning but it is not as dramatic as those numbers would suggest.

Q119 Chair: Would you rule it out altogether?

Professor Slingo: I probably would on the basis of the extent of ice, particularly through the winter, and also that we do know there is still a lot of multi-year ice there. We do have some estimates from our models of how much thinning of the ice there is, but to say we have lost 75% of the volume is inconsistent with our assessments.

Q120 Mr Spencer: Can we focus for a while on the impact on the UK, weather patterns and climate in the UK, and what your assessment of the impacts of a reduced or disappearing ice cap would be?

Professor Slingo: We now have increasing evidence from work we have done-literally, in the last few months-that the depletion of ice, particularly in the Baring and Kara Seas, can plausibly impact on our winter weather, and lead to colder winters over northern Europe. It is only one of a number of factors, though, that predisposes what our winter weather will be like, so we need to be clear about that. It is not a dominant driver of winter weather, particularly over the UK, but it is a factor. As I say, it is particularly for those parts of the Arctic Ocean, when they become ice free, and certainly the last couple of winters or so we have seen less ice than normal in the Baring and Kara Seas.

Q121 Mr Spencer: I don’t know if you have had the opportunity to see that DEFRA published the UK Climate Change Risk Assessment in January.

Professor Slingo: Yes.

Q122 Mr Spencer: Do you feel that adequately reflects the changes in the Arctic?

Professor Slingo: Of course it can’t in its entirety, because of the nature of the modelling that it had to be built on. It was a long process to produce those climate projections, and if you remember they were published in 2009 and formed the basis of the Climate Change Risk Assessment in 2011. You also have to remember that it was built on models that were developed in the early part of this decade, therefore they wouldn’t have had the sophistication of the Arctic sea ice modelling that we have now.

Nevertheless, as I have said, the impact of the reductions in Arctic sea ice extent, which we have seen in the last few years on our winter climate, is only one of a number of factors, and certainly last year was probably not the dominant factor.

Q123 Mr Spencer: One of the risks they identify is water shortages, but you have already mentioned colder winters. Does that mean a reduction in precipitation during the winter months? Because one of the other factors they talk about is wetter summers. It doesn’t seem to marry up that wetter summers and cold winters necessarily lead to water shortages. It is just the opposite in fact.

Professor Slingo: Colder winters, yes, you do get less water because the precipitation will tend to come as snow, which has much less water content, and colder air holds less water. It is quite simple. The replenishment of aquifers generally occurs through the winter and into spring. Once you get beyond about April/May time, the summer temperatures are high enough that even if we have a wet summer, it doesn’t replenish the aquifers, a lot of the water evaporates away. We are concerned that if we continue to have a sequence of cold winters, that could be much more damaging, even with wet summers going alongside them.

Chair: We said we would move on to modelling, so I will turn to Dr Whitehead.

Q124 Dr Whitehead: Your modelling, and particularly your most recent report, seems to suggest that the models predict a slower rate of reduction than we actually see in reality. How accurate do you think available modelling is, and to what extent is that modelling being informed by what is happening in reality in order to adjust the modelling? I note what has been said about the 2007 occurrence: would you regard that as wholly anomalous in terms of the modelling, or is that something that might be integrated into it in the future?

Professor Slingo: The rapid decline in sea ice extent in 2007, as I said, was associated with some very anomalous atmospheric circulation patterns and was followed by quite a recovery the following year. We see similar excursions from the trend line in our modelling, so we feel that there is an actual variability here that is associated with year-to-year changes in the atmospheric circulation. Also, as the Arctic warms and the sea ice becomes thinner, you do expect, even from theoretical calculations, that the extent will become more volatile. We see that in our models too, so I think we are capturing the trend and the volatility quite well. You won’t exactly capture particular events because they were driven by other factors, such as-quite simply-what is going on with El Nino in the tropical Pacific, which is one of the factors that drives the changes in circulation around the Arctic.

Clearly the whole ocean atmosphere-cryosphere interactions are incredibly complex and how the Arctic Ocean takes up heat, and how that then affects the sea ice behaviour, we are still learning about. There is no doubt in my mind that the sophistication of the models, which are now going into the Fifth Assessment Report, and on which our evidence is based, are remarkably realistic, in terms of, as I said, the ability to represent the annual cycle, which is non-trivial, and the ability to capture the volatility from year-to-year, and the ability of the ice to recover again when you have a very depleted season, if the atmospheric circulation is appropriate for that to happen.

Q125 Dr Whitehead: To what extent are you factoring in, in your models, for example, the possibility of the impact of international agreements on climate change? What are the general assumptions on climate change that the modelling is making on, for example, the far greater intensity of temperature increase in the Arctic, affected to some extent by what is done in terms of mitigation elsewhere in the world and, therefore, possibly agreements?

Professor Slingo: Yes. Obviously, as part of the IPCC process, we run a range of scenarios that assume different levels of mitigation, even looking at mitigation of different species. Because it is important to understand that this is not just a carbon dioxide problem, it is also related with particulates in the atmosphere. Our scenarios do look at that, and the way in which we mitigate will change the evolution of the sea ice over the Arctic. It doesn’t appear to do it substantially actually, so we would still be looking, even with the most aggressive mitigation scenarios, at quite a significant loss of Arctic sea ice by the end of the century.

Q126 Dr Whitehead: Finally, what sort of modelling factors may be accounted for by the possibility of tipping points or feedback attached to these? For example, the argument that follows very substantially from the extent of continental shelf that there is within the Arctic Basin and, therefore, the particular relationship that warming on that relatively shallow sea has on trapped methane-for example, the emergence of methane plumes in that continental shelf, apparently in quite an anomalous way-leading possibly to the idea that there may be either tipping points there or catastrophic feedback mechanisms there, which could then have other effects on things, such as more stabilised caps like the Greenland ice cap and so on. I rapidly collated all the possible catastrophe theories, but I mean how are those factored into the modelling process?

Professor Slingo: I think you are talking about methane hydrates particularly here, aren’t you-

Dr Whitehead: Yes.

Professor Slingo: -particularly the ones that are in the Arctic shelf, which are different from the deep hydrates that we have been talking about, millennial timescales to destabilise those. This is still very early science, and we have some estimates of what may happen to those from modelling studies, from looking at the way in which the heating of the very upper layers of the Arctic Ocean is transferred down through the depth of the ocean-even in these relatively shallow Arctic shelf regions-and then into the sediments that would allow the methane hydrates to destabilise. Our estimates of those are that we are not looking at catastrophic releases of methane.

I think there is a lack of clarity in thinking about how that heating at the upper level of the ocean can get down, and how rapidly it can get down into the deeper layers of the ocean. You have to remember that the heating occurs as the ice melts in summer and creates a very stable, very much less dense layer of ocean water. It is fresh, because the ice has melted, and it is a lot warmer, because it is receiving the sunlight, and unless you have quite strong winds that will just sit there. Then as you go into autumn and early winter, that heat is radiated back to space and lost. In fact there is good physical evidence that in those situations the Arctic-actually, the ocean as a whole-gets colder, that because it is not ice covered you can lose the heat more rapidly in autumn and winter. So there is still a big debate as to how much the actual continental shelf itself will warm. At the moment, our estimates are that the increases in sea floor temperatures that have been observed have at the most been about one-tenth of a degree, except in one or two regions, like the West Spitsbergen Current, where you may be looking more at advection-ocean currents bringing warm water in from the North Atlantic-where the temperature has gone up by about a degree, and that is where some of these methane emissions have been observed.

Also very interestingly-in the papers on that area-where there is methane coming out of the continental shelf there it is not reaching the surface either, because again the methane is oxidised during its passage through the sea water and none of those plumes made it to the surface. So there is a general consensus that only a small fraction of methane, when it is released through this gradual process of warming of the continental shelf, actually reaches the surface.

Q127 Mr Spencer: I apologise for my ignorance, if it comes across. The modelling on the ice pack and its effect on sea levels, presumably ice is not as dense as salt water, so as that ice melts the amount of water displaced by the ice will be less than the water that is created. Does that mean that sea levels will go down as the ice pack melts or go up?

Professor Slingo: No. Sea ice has very little impact on sea level because the ice floats, so you are right it is less dense. A good part of the ice is above the surface of the water and when it melts you are just getting an exchange.

Q128 Mr Spencer: That is greater than the amount of ice below the water?

Professor Slingo: The net effect is very small indeed, so the main issues around sea level changes are related to land ice.

If I may, I just wanted to finish on Alan’s question. The end result of these calculations-the estimates that we have from a major review paper that was done by international scientists last year-was that about 20 to 25 teragrams per year of methane could be emitted by the end of the century from the continental shelf, and you need to compare that number with the current emissions just from wetlands of 100 to 230 teragrams per year. So we need to put this in context: it is significant, but it is not overwhelming.

Q129 Mark Lazarowicz: On this point, in your view, are there any other changes where it is fair to talk about potential tipping points, as far as the effects of climate change in the Arctic are concerned, or is that just something that we can’t say at this stage given the state of the science? Is there anything else we should be looking out for, if you see what I mean?

Professor Slingo: You have to also look at potential linkages with the thermohaline circulation, and the fact that the formation of the descending branch, the deep cold branch of thermohaline circulation, is driven from the sea surrounding the Arctic. We have no evidence so far that there is a tipping point there at all. In fact, we have to be very careful in the use of that phrase to pinpoint. We don’t see catastrophic change in the Arctic that would lead to catastrophic releases of methane, or very large changes in the thermohaline circulation, within the next century. Our understanding of the various feedbacks-and it is a very complex system-both through observations and modelling, suggests that we won’t see those catastrophic changes, in terms of the physical system. Of course a largely ice-free Arctic in summer is a catastrophic change in other respects for other systems, but if we are just talking about the physical system, then we don’t-

Q130 Mark Lazarowicz: The other systems being what, the effects on wildlife or something?

Professor Slingo: Yes, and the indigenous populations, absolutely.

Q131 Mark Lazarowicz: That related to a question that I was going to ask, which is the pros and cons of geo-engineering techniques to stop temperatures rising in the Arctic. It is fair to say the strongest advocates are those who have the most extreme predictions of what is going to happen. Given that, what is your view of the benefits of or the other case for such techniques?

Professor Slingo: Our view in the Met Office on geo-engineering activities-and we are talking principally here about solar management, so stratospheric aerosols, cloud seeding and so forth-is that we understand very well now that even the very simple forcing of the global system, which we have done through carbon dioxide, has huge regional ramifications and the same would be true with geo-engineering. The regional impacts on rainfall and weather patterns need to be fully investigated before we go down that road. It is not just about whether we can decrease global temperatures by a certain amount. That will have very serious consequences for regional weather patterns, and therefore it particularly impacts on rainfall. We know those from the model simulations we have done, where we have simulated the effects of different aspects of geo-engineering. The other side of that, of course, is that all these options, once you start them you have to keep on doing them. As soon as they stop the planet warms back up to where it would have been, if you had not had them in place, in a matter of a very few years rather than the gradual warming that we are currently looking at.

My view is that, as scientists, we have to consider these things, and we have to make sure that due diligence is done through the science to understand all the consequences of such actions before we pursue them, and we certainly haven’t done that yet. There is a lot more work to do.

Chair: I am just going to see if any Member has any questions to ask at this stage. In that case, thank you very much. What you have done is really set the scene for us, in terms of the evidence that you have, and we are very grateful for the work that you do. Hopefully, you will take a keen interest in our recommendations when we come out with them at the end of the inquiry.

Professor Slingo: We will indeed.

Chair: Thank you very much.

Examination of Witnesses

Witnesses: Richard Heaton, Exploration Director, Cairn Energy, Peter Velez, Upstream Global Emergency Response Manager, Shell International, and Robert Blaauw, Senior Adviser, Global Arctic Theme, Shell International, gave evidence.

Q132 Chair: I welcome all three of you to our second session this afternoon. I am aware that you sat through the previous witness session. We are very grateful to you indeed for being available to commence early, because we do have a lot of questions that we want to try and get through. We are anticipating possibly a Division in the House of Commons, so if that occurs we would ask you to bear with us. I understand you have each asked to make a brief-and I do mean brief-statement to the Committee by way of introduction. I would invite you to do that now, perhaps beginning with Mr Blaauw.

Robert Blaauw: Thank you very much, Madam Chair. I have prepared a short two minute introductory remark; is that allowed in this session?

Chair: That is fine, very brief.

Robert Blaauw: Thank you very much. My name is Robert Blaauw. I have been working for Shell for more than 30 years in technical, commercial and general management functions. I am currently Shell’s Global Arctic Theme lead, dealing with technical, social, environmental and communications policy for the Arctic since 2010. My role includes engaging with environmental NGOs in support of Shell’s business in the Arctic, and working with the International Association of Oil and Gas producers, which is based in London, where I chair the Arctic Task Force to improve global industry standards in the Arctic.

I would also like to introduce Peter Velez, Shell’s Global Emergency Response Manager, and also the industry-appointed member to the US delegation of the Arctic Council Oil Spill Response Task Force. Peter has more than 36 years of engineering and operational experience and is deeply involved in the Alaska oil spill response programme, as well as co-ordinating related research and development programmes.

I welcome the opportunity to submit oral evidence to the Committee today. I believe what Shell and the industry have done, and continue to do, to prepare for responsible operations in the Arctic is a story that needs to be told. It also allows me to put forward the industry point of view, as there has been a lot of written and oral evidence submitted to the inquiry so far. We welcome the opportunity today to address the issues raised and to provide some perspective on some of the claims made.

Everyone recognises that the Arctic is a unique environment that poses special challenges, in terms of biodiversity, impact of climate change, sea ice in winter, and its variability, climate, indigenous people with traditional lifestyles. Our existing operations in the Arctic already go to significant lengths to ensure that this unique environment is protected, and we will apply the same principles as we seek to explore the region further. The need to listen to stakeholders, to earn their trust and address the challenges we jointly face, is fundamental to our support, our licence to operate. No harm to people and environment is the guiding principle in our operations, and nowhere is that more important than in the Arctic. At Shell we have a saying, "We must earn the right to be in the Arctic every day".

As global energy demand is expected to double by 2050, all viable sources of energy will be needed to supply the energy solutions that consumers demand; renewable energy sources will play an ever more important role in this. Shell contributes to this effort to reduce CO2 emissions by producing more natural gas. The cleanest burning fossil fuel does play an important role in helping to build a more sustainable energy future, alongside the growth of renewables and significant investment in carbon capture and storage projects, and also in the production of lowest carbon biofuel available today.

Our experience tells us that the transition to renewables can’t happen overnight. Hydrocarbons will therefore continue to play an important role in meeting rising energy demands for decades to come, and that is why we believe ongoing oil and gas exploration matters. It ensures the security of our global energy supply over the coming years and provides the affordable energy on which growth and jobs depend. The Arctic is believed to harbour large amounts of oil and gas, mostly located in the lightly explored offshore marine environment.

Arctic oil and gas operations are not new, and industry has decades of experience in drilling for Arctic oil and gas and producing it, both onshore and offshore. 500 wells have been drilled today offshore without well control incidents. Wherever the industry goes, it brings a lot of science to the table, to better understand the environment and to minimise the potential impact of operations on the environment. In the Arctic we are building on decades of scientific research-

Q133 Chair: Sorry, I hope you do not have a much longer submission.

Robert Blaauw: Okay. I will then cut it by half and take another 30 seconds, if I may? Thank you very much.

The Arctic is a diverse region and Shell operates throughout it. We have offshore exploration licences in the Chukchi and Beaufort Sea in Alaska, and we plan to drill exploration wells this summer during the open water season. We also hold two exploration blocks in Baffin Bay in Greenland, which will carry out 3D seismic this summer. We partner with Sakhalin Energy, operating the Sakhalin-2 project. It is a very large integrated oil and gas project in the far east of sub-Arctic Russia. Although sub-Arctic in terms of latitude, the area has many Arctic characteristics, such as sea ice and very low temperatures in winter.

Q134 Chair: Sorry, if I can just interrupt. I think I have been quite generous in letting you have a two minute introduction; it has gone well beyond that. We do have a lot of Committee Members and a lot of questions, and I by no means want to suggest that the evidence you are giving isn’t important, but I think it perhaps could just as usefully be submitted as written evidence and then that would give us the time to get to the questions.

Robert Blaauw: Thank you very much, Madam Chairman.

Chair: If you could just bring your comments to a conclusion, I would be grateful.

Robert Blaauw: Thank you.

Q135 Chair: Mr Heaton, I just wonder whether or not you would like to also have the opportunity of a very brief introduction, which I understood you wished to give to us.

Richard Heaton: Yes, I hope I can make a reasonably brief introduction. Thank you very much. Good afternoon. I am Richard Heaton. I am Exploration Director at Cairn Energy. I have worked in the industry for about 30 years, the last 18 with Cairn Energy. As you know, we have been operating for the last five years in the Arctic, specifically in Greenland.

There are three main points I want to make. As you will know, oil exploration in the Arctic has been going on for many years, in fact nearly a century. Over 500 wells have been drilled offshore and many thousands onshore. As an industry, we are used to dealing with the challenges in the Arctic. That is the first point.

Secondly, obviously there is a huge demand for energy in the world and, while renewables have a place in meeting that demand, it is going to take some time to fill the gap. Therefore we believe continuing exploration for hydrocarbons is going to need to take place, including in the Arctic.

The third point is that, in doing so, we are very, very conscious that we need to do that in a prudent and safe way, to take account of all the necessary measures, and work with Governments and agencies to do that in a prudent way. I think what we have been doing over the past few years demonstrates, both ourselves and as an industry in general, that that can be done.

Q136 Chair: Thank you very much indeed for that. In your introductory comments you have both talked about a transition period and the move towards renewables, but in the meantime the need to concentrate on traditional exploitation of oil and so on. I would be interested to know, from both companies’ perspectives-perhaps starting with you, Mr Heaton-how significant exploration in the Arctic is to your company’s future prosperity?

Richard Heaton: Cairn has been operating around the world. For the past four or five years, we have concentrated heavily in Greenland, but this is only one aspect for our company, we have a broader portfolio.

Q137 Chair: You could quite easily manage without this?

Richard Heaton: No. It is an important part of our business. It is just a part of a broader business, so it is important for us.

Q138 Chair: Thank you. Mr Blaauw?

Robert Blaauw: Yes. As conventional resources run out, you will be focusing on the unconventional resources but also in different locations, and that is where the Arctic comes in. For Shell, we have a major interest in Sakhalin Energy where 10 million tonnes per annum of LNG is being produced to go to Japan, Korea and other markets. It is a major part of our business. Alaska is on the brink of becoming a major business after this drilling season, and Greenland is on the cards, so by all means business will be developed slowly, but if it will be developed, there will be sizeable chunks that can serve the consumer demand for oil and gas.

Q139 Chair: In terms of all the predictions that there are about climate change-and you each mentioned climate change in your introductory comments as well-do you see the plans that you have for oil exploration and exploitation to be at odds with the need to, at least, confine overall temperature to two degrees?

Robert Blaauw: We have the climate scenarios and we will make these available to you. In the meanwhile, we see that it will take a couple of decades to get to a much higher percentage of renewables. Gas is a very good bridging fuel to get there as it has less than half of the emissions, for instance, that coal has and also much less than oil has. I will make these scenarios available to you.

Q140 Chair: But does Shell accept that there is a timescale in which we need to be doing more, quicker, and that your company has a part to play in that?

Robert Blaauw: We do have a role to play in that, and that is indeed why we do shift to gas but also we make major investment in second and third generation biofuels. On top of that, we make major investment in carbon capture and sequestration solutions around the world.

Q141 Caroline Lucas: You mentioned the global energy scenarios that you have created, and they appear to show a global peaking of emissions in 2030. If we wait until 2030 for that global peaking then we will have committed the planet to a warming of at least three degrees, and probably four degrees, so what planning have you done, in terms of your business plan, as to how you will operate as a business in a world that is three or four degrees warmer?

Robert Blaauw: I will make that data available. For the Arctic-and that is the session today-we have a wide range of scenarios that we have to design our installations. You need to realise that if the ice gradually melts, the design conditions for platforms in the Arctic are more difficult, because on the one hand you have to design for ice but at the same time for more ice bergs and for higher waves.

Q142 Caroline Lucas: But that is a separate issue, with respect. I mean the broader issue is around-

Robert Blaauw: No, but we take that into account.

Q143 Caroline Lucas: We are going to get to the detailed questions about the Arctic in a second. This is a preliminary question about the overall business plan of Shell that, looking at your own global emissions scenarios, talks about a peaking in 2030. What I think would be useful for the Committee to understand is what your business plan looks like. What modelling have you done for your business in the planet that is warming three or four degrees by the end of the century?

Robert Blaauw: We will do our utmost to enable the transition to lower carbon fuels through the programmes that I have just mentioned.

Chair: Okay. Well, we shall look forward to receiving the data that you just referred to. Did you wish to come in, Peter?

Q144 Peter Aldous: Just following up these particular points. You referred to the transition taking a couple of decades. Does that mean that the investment in renewable technologies you are putting off to 2030 or you are actually working on it now, are you?

Robert Blaauw: I think, globally, investments in renewables are strong. What we focus on is the biofuels-indeed, we have a very big operation in Brazil-and we invest majorly in R&D for better second and third generation biofuels, and solutions to re-inject the CO2 permanently, so that it doesn’t have any effect on greenhouse gas for the hydrocarbon project. So that is what we concentrate on. Other companies will concentrate on other parts of the total energy picture.

Q145 Chair: Mr Heaton, if I could perhaps just turn to you as well. So the previous question that I asked, in terms of your own company’s prosperity linked to oil exploration and exploitation and it being consistent with the climate change agenda.

Richard Heaton: It goes back to the point I made in the initial statement, that I think-as do Shell-there is this period of time when oil and gas are perhaps the most efficient way to help bridge the gap between the rising energy demand across the world, and other forms of meeting that energy gap.

Q146 Chair: Can I just interrupt, if I may. You say "efficient way". Does that take account of environmental limits?

Richard Heaton: We work all the time, wherever we work, in conjunction with the Government and the organisations, if you like, who regulate our industry, including of course in the UK the Departments here who have a similar role to those around the world. It is working through those regulations; those set the conditions that we work under.

Q147 Chair: We will come on to the regulation shortly, but what you are effectively saying is that you rely on the regulations to provide the constraints within which you operate?

Richard Heaton: Obviously it is one of the key ways that our industry operates, yes.

Q148 Caroline Lucas: Can I just find out whether you agree with the principle that, in order to be able to meet climate change emissions reduction targets, a considerable proportion of known reserves of oil and gas are going to have to remain underground, if we are to have any hope of meeting those emissions reduction targets?

Richard Heaton: It is a question of rate of use.

Q149 Caroline Lucas: As far as the climate is concerned, it matters less about the rate of use, it matters whether or not we are going to use it all. Do you imagine that the oil companies’ future lies in chasing every last bit of oil and gas that they can find underground?

Richard Heaton: Oil and gas companies are there to do that. That is what their business is.

Q150 Caroline Lucas: Even if that runs absolutely counter to a whole set of other aspirations that we might have, like a-

Richard Heaton: Through regulation, presumably, if it was believed that that was the best thing to do. It is by working around the world with different Governments.

Q151 Chair: Just one further brief question from me. There was a report done in February by a group of 20 or so experts, investors and NGOs, looking at the amount of exposure that the UK has to high carbon investments. I think there has been some discussion as to whether there is a carbon bubble developing that would put people’s investments at risk, and that the UK has got a particularly high exposure to all of this. Is that something that each of your companies would recognise? Is it something that you factor into your long-term planning and decision-making? Perhaps Mr Blaauw first of all or Mr Velez.

Robert Blaauw: I need to pass on this question. We will come back on that on how it relates to the UK.

Chair: I beg your pardon?

Robert Blaauw: I will pass on this question. We come back with written evidence on how that relates to the UK.

Q152 Chair: Does that mean you don’t actually know, or does that mean you have to have a company line to take? This is a cross-cutting Committee, and obviously exposure to the amount of dependency upon carbon investment is an important issue. I am just a little bit surprised that you haven’t got that at your fingertips.

Robert Blaauw: Personally I don’t know. I came here to talk about the Arctic, but we do of course have that information available.

Chair: Okay, fine. Mr Heaton.

Richard Heaton: I am in the same position. It is not something that we have at our fingertips.

Q153 Chair: All right. Can I just say then, because this is something that gets raised in this Committee whereby often you get finance directors, you get chief executives, and you get operational managers, each of them operating within silos, so I take it that there isn’t that cross-cutting understanding of the overall environmental agenda within which each of you are operating. Through your corporate social responsibility agendas that has not been something that has been factored into management decision-making within each of the two companies, am I right in that?

Robert Blaauw: I think at a global level there is a reasonable understanding shared by staff what our commitment is to reduce our greenhouse gas emissions.

Richard Heaton: In the same way, we do have a general understanding. It is part of what we do as a general thing, not specific.

Q154 Chair: But that is a matter for somebody else within your company?

Richard Heaton: We are all part of the same company. We work within the same systems.

Q155 Chair: One of you-I am not sure which now-made reference to carbon capture and storage, and recognised that might be an important prop through this transitional period. Do you think it is likely that CCS or other options could permit continued burning of the fossil fuels that you produce?

Robert Blaauw: It will reduce the greenhouse gas of oil projects, and Shell is investing in a big project in Canada related to oil sands, to re-inject CO2 from an upgrade of a refinery, and that is a good project and that does reduce the greenhouse gas by a large, large amount.

Q156 Paul Uppal: Two questions, and I will start with the initial one, which is specifically to yourself, Mr Heaton, because at the end of your closing comments you specifically made reference to the collaborative approach between stakeholders and Governments and various bodies. If I can just read a quote, Cairn’s memorandum states, "Most Greenlanders support the investment of companies in hydrocarbon and mineral exploration and the opportunities such new businesses can bring". I was just wondering how you actually reach that conclusion and what is the evidence base there to put that statement out?

Richard Heaton: We have been working now in Greenland for five years. It is a small population. We have had a fairly major impact upon the economy of Greenland during that time. The investment that we have put into Greenland, in terms of the operations that we have undertaken and the employment that we have been able to engender in the country-contracts with local companies-have added as much as 25% to the subsidy that comes from the Danish Government. It is a heavily subsidised country, and they receive an annual grant from the Danish Government. Our additional investment in the country is significant; it is a further 25% over and above that which the Danish Government has given.

That does impact many, many people in Greenland. The population of Greenland is around about 55,000 people, and that does have a major impact on them. We work with them in many communities up and down the coast where we are working, so we have a lot of interaction with the local populace, so our evidence is based on our experience.

Q157 Paul Uppal: It is very much the outcome of your experience, your interaction there, that is what you are saying?

Richard Heaton: It is. It is a working part. That is the same wherever we work in the world. Clearly we do engage heavily with the local population, making sure that they understand. We consult with them, hopefully, and what we are aiming for is not just consultation, of course, but consent from the local population for what we are doing and how we are doing it. There is a very rigorous procedure for consultation ahead of any operations that we undertake there and we follow that through-as do all the other companies in country-and that does take a considerable amount of time. Through that you do get to learn how they want their country to be treated and they are deeply interested, as you might expect.

Q158 Paul Uppal: Where I am going with that, the second point, which is a broader point here-and I would like all three of you to comment on this-is that dynamic of how you deal with that, in terms of the context of the wishes of native peoples in states. Essentially there will be differences there. How do you deal with that? How do you encompass all views in that, and how do you reconcile that because there must be differences there?

Peter Velez: I will talk about that and I want to probably talk from the Alaskan perspective. I am very involved in the Alaskan project, and I go to Alaska frequently. As a matter of fact next week I will be all week in Alaska. We essentially have a lot of engagements and meetings that we do at all levels, so we meet with public officials, we meet with mayors, council people from the different villages, and I can tell you I have been to many villages many times: Barrow, Deadhorse, Kotzebue, Kivalina, Point Hope, Point Lay, and so on, in multiple trips. In those trips, we also engage with the local community and elders. The elders are very important in those villages, so we have many meetings with them, with the whalers, the Whaling Commission, whaling captain groups, and also with the general public, in which we share our plans with them, we share our experience with them, what we are planning to do, when we plan to operate, what our rigs look like, what our traffic patterns are going to be for helicopters, and we also listen and take back feedback. On many of our vessels, for our operational activities, we have what we call marine mammal observers, of which the majority are people from the villages who have local knowledge and understand the area well, and they work on our vessels as they transit, making sure they are looking for marine mammals.

Another example that you may be interested in, is that when we are going to drill in the Beaufort we are going to be drilling during the open water season, from around mid-July through the end of October, both in the Chukchi and the Beaufort. It is the open water season. We are not drilling outside of that time period, and it is an exploration well, so we are drilling there in shallow water. These wells are very low pressure wells, unlike other wells that you may have heard of.

During that period we share with them what our drilling plans are, what the wells look like, how we are going to drill them, what our contingency plans are, our critical operations plans. They requested from us in the Beaufort that during the whaling season, when the whales migrate through the area, we shut down our operations. So for a two-week period, around 25 August, we are co-ordinating with them. Towards that we will shut down our drilling operations and move out of the way so that they can do their subsistence hunting.

So we listen to them, we work with them, we get ideas from them. We have advisers in all the villages that work with us and interface with the villages that are all along the coast, and we are also going to place oil spill response equipment in different communities to be ready in case of an emergency or an unintentional oil spill. Most of the crews that are responsible for that equipment are people from the villages. We call them the Village Response Teams-VRTs-and they are part of the teams that will work with us and we train them and work with them on that area.

Q159 Paul Uppal: Anything else you would like to add to that, Mr Heaton?

Richard Heaton: No, I think that is-

Chair: I think Peter Aldous wishes to come in.

Q160 Peter Aldous: Mr Velez, you have just touched on the things I was about to touch on. When you go into these communities it is significant change you are bringing to that area, and I am just interested in as far as you may place pressures on the infrastructure, on the community facilities, there is also the potential upside of significant job opportunities. Are you investing in the infrastructure in these communities? Are you training people to take advantage of these opportunities, or is it going to be highpaid executives just flying in and then when everything is finished moving out? Is there an opportunity for the local community to take advantage of this?

Peter Velez: A great question. There are many opportunities for local village personnel to work, for example, in our response team, by working on our logistics basis, working as marine mammal observers. Our objective is always to maximise the number of local people that work for us. We have a lot of local people working right now for us in Anchorage, which is where our main office is in Alaska. We also have a main office in Barrow and Deadhorse, and we also have people deployed there. We try to bring in people at all levels, so we want people that will help us as response teams but we also have interns that we bring in, who are native Alaskans, to help us essentially, as they are in college and we want to expose them to the oil and gas business so they are working in our offices.

The other area that we also do a lot of work with, the majority of the contractors that we have up there-and I will use, for example, the oil spill responders that provide us with trained crews-are from native corporations, so the native corporations are very good corporations up there, like the Alaskan Slope Regional Corporation, UIC, and UMIAQ, an indigenous corporation, and there are other companies up there that are great providers of personnel and very skilled contractors for us and very well qualified, so we work with them as part of our construction projects, infrastructure projects and other things that we have.

I work with them all the time when I go up there, because we interface and they are part of our regular team, and they continually work even on some of the research projects that we are doing. I will give you one example. On one of the research projects around dispersants, there was a combination of a consulting firm out of Washington State, a very knowledgeable consulting firm called Newfield, and the University of Alaska. The University of Alaska put quite a few personnel into it and built a laboratory with them in Barrow, essentially to capture samples up there and run the tests up in Barrow, which also brought jobs to the community and the fishermen. So working with whaling captains and other people in the community is a very important issue to us, and we are doing it and we will continue and we are always looking for opportunities to expand the use of native personnel.

Chair: Okay. Just before we move on-

Robert Blaauw: I would like to add something there, if I may?

Chair: Yes, okay.

Robert Blaauw: What Peter just said is at the very beginning of the exploration phase, after which you go to the development phase, you look at decades of stable production and indeed complete integration of the work force in the operations. In Sakhalin, for instance, the unemployment went down from 20% to 1% in a couple of years, and you will see that decade after decade. This is at the very beginning, but when you ramp up in development and production there is much, much more to come.

Q161 Chair: Just before we move on from Mr Uppal’s question, can I just press you a little bit more because in this country we have an agenda, which I suppose we refer to as localism, and we are actually taking about local people and the wishes of local people. In a way, I think that what we are trying to understand is not only what kind of links and relationships you have with the states of the countries that make up the different Arctic area, but actually with people at the grassroots level. I am very conscious, for example, that there is a European Commission Council decision relating to Greenland and the Kingdom of Denmark, but I am not talking about at the state level. I am talking about what kind of relationships do you foster with indigenous people, not necessarily with the state officials who might be involved with the licensing and so on of the exploitation of oil? If there were local people listening in-for example, to this session now-what would you say would be the substance of the relationships that you have with local people, so that we can get an understanding of that aspect of it?

Peter Velez: To put it in perspective, and maybe help explain, I go to many villages-in the last few years we have done about 450 visits to these villages, a large number, and I have been involved in many. When we go to these villages, we are talking about villages in the North Slope that vary anywhere from about 200 people, to Barrow, which is the biggest, about 4,600 or 4,700 people in the village. When we have an engagement at a town hall level in some of the small villages, you may have almost the whole town show up at these briefings at their community centre, and we sit down, so you have anywhere from-

Q162 Chair: When you sit down, what do you do with them?

Peter Velez: We share information, review plans and then open the floor to questions that they may have about our plans, explain this and explain the drilling rigs. Sometimes they want to talk about jobs. Sometimes they want to talk about science. Sometimes they want to talk about our transportation arrangements that we are making. No topic is out of limits with us when we open it. It is all the way from elders to children that are attending because we feel it is also important to meet the children of the school, and we have programmes to help with the schools to try to bring science to the schools that are in this area, to essentially try to also bring additional areas in for them to start thinking about careers in the oil and gas business.

From that perspective, there is a lot of activity that we engage in and we also have people that are located in these villages that are working on this on a daily basis. I do a trip up there for a week. I will hit five villages in five days, one village per day and some meetings last four or five hours.

Chair: Thank you. I will move on then to Martin Caton, if I may.

Q163 Martin Caton: What are the main risks of drilling in the Arctic, over and above those faced in other regions? I am thinking of all forms of risk-to your personnel, to the local environment and to the global environment.

Peter Velez: If I may, I will address the risk from the operational activities. Any operation that you do may carry some risk, but we spend a lot of time looking at what do we need to do to prevent a risk from taking place? Therefore when we are looking at, say, exploration drilling, which we are looking at doing here in this case, we look at many factors, such as the well design, the equipment that we have, the training of the crews, and then the barriers that we put in place. So we have multiple barriers when we design a well and drill a well to make sure that we have more than enough barriers in there.

A couple of examples are, when we drill in Alaska we are going to have dual blind shear rams on our blowout preventers. We monitor the wells. We have experienced crews on site, working the rig and so on, but we are also monitoring these wells from a remote location with a second set of experts on a 24-7 basis. We have real-time operation centres located in Houston, New Orleans and Aberdeen. The well may be being drilled out there in the Chukchi Sea, and we have experienced people that are working on the rig, supervising the operation and overseeing the operation with the crews, but there is going to be, 24-7, somebody in one of these three centres also looking at all the safe parameters of the rig and making sure that if there is any indication or any signs that they are also in direct communication with the rig.

Oil spill response, for example in Alaska we have what I call world class. I have been involved with it since day one. We have equipment that is dedicated just for our drilling operations onsite within one hour of the rig, so if something happens we will have equipment deployed on the water doing any response operations within one hour. We don’t have to wait on equipment coming.

Q164 Chair: I think it is the risks we really want to know about.

Peter Velez: Yes. The risks are that we are drilling a well, as you all know there are risks with drilling a well. But what we do is we have many things that we put in place, procedures and standards, to essentially eliminate the risk or mitigate the risk so that we do it. The one thing I wanted to add is that to Shell-and I think the industry as a whole, but I can talk about Shell specifically-safety and the protection of the environment is always our first priority: so the safety of our personnel, the safety of the crews and the safety of the public, along with protecting the environment we always look at in each project. I heavily get involved in it, because being the Global Emergency Response Manager, a lot of my focus is on reviewing projects, looking at prevention measures and making sure that all those barriers are in place, and testing the barriers to make sure that they are in place.

Q165 Martin Caton: What about the particular risks in the Arctic, as compared to other regions?

Peter Velez: Are you talking risk, like cold weather or-

Q166 Martin Caton: Obviously we are an Environmental Audit Committee, so our main priority is risks to the environment. We know so little about the ecosystems of the Arctic, so I wonder what work you have done to identify what risks there might be to biodiversity in that part of the world from your activities?

Robert Blaauw: Yes. That is a good question. What we really need to understand is the environment that you operate in, in terms of biodiversity, in terms of physical environment, in terms of social environment. Years and years ago, before we started in Alaska, we had done a long time series of studies in everything from the benthos to the water column-everything that lives in there-to birds, to sea conditions, to ice, and factored in the risks that our operations, our impacts may have on that. We now have a really good holistic view of how the ecosystem in that area of the world works. Some 5,000 studies have been done in the last 30 years and 80% of all these studies are in support of the various companies in the industry, in offshore Alaska. We design our operations, such that we limit the impact and that we avoid any interaction with whales, for instance, which are very important for local people in terms of their subsistence way of living.

With ice, you need to understand the ice so what we do there is many years of detailed observations, study the ice, model the ice, see when the ice comes back at the end of the season so that your rig is out in time, and things like that. Of course, there are the ice forces on the structure. In the longer term when you place structures in the shallow offshore, you need to understand what the ice forces are and how you have to design your pipelines, how deeply you have to bury them. All these things are being addressed through design work and through research work.

Q167 Martin Caton: You said you avoid contact with whales. How can you plan to avoid contact with whales and dolphins when-

Robert Blaauw: By observing them carefully during your operations. For instance, on seismic when there is a whale-and I think the distance is 500 metres, it can be 1 kilometre-then basically you stop. There are also programmes where there is remote monitoring of whales through drums, and also through underwater unassisted vehicles.

Peter Velez: I can expand a little bit more; it is a good question. So we have marine mammal observers on all our vessels who are, for the most part, people from the local villages. They are very knowledgeable, not only about the area but also about the patterns of the whales. They are used to seeing them, so they know what to look for. They are on board our vessels full-time. We also have aircraft that we fly to essentially monitor the area, and then also we have acoustic sensors that are deployed gathering data, so the traffic or the movement of the whales is fairly well known by the local personnel. The whaling captains know it very well, so they work with us in co-operation sharing this information.

As we transit, for example offshore, we will not transit by helicopter or by vessel along the typical route that the whales might break through. We work with them, and they co-ordinate with us, and we have communication centres, because they keep track of this and they know where the whales are migrating, so we avoid that, so that sound, for example, does not impact on the whales’ migration pattern.

Chair: I am just bringing Caroline in, just to go back to the risk issue.

Q168 Caroline Lucas: Given the particular challenges of working in the Arctic, can you tell us what estimate you have made of cleanup costs should a worstcase scenario happen in the Arctic?

Peter Velez: The way that I look at it is that I don’t look at the cleanup cost. I look at what is required to make sure that we have the best available oil spill response equipment out there to respond to a spill in the-

Q169 Caroline Lucas: But if there is a worstcase scenario, and you are using all of the things you have put in place, your company must have some idea of the financial cost to you of that?

Peter Velez: We have a cost for equipment, and we have spent several hundred million dollars on equipment already for Alaska. The cost to respond to a spill, essentially, in the United States, the regulations that apply in Alaska is that the operator is responsible for unlimited cleanup costs, so therefore we would be responsible for it.

Q170 Caroline Lucas: You have a number of worstcase scenarios. You have them based on certain numbers of barrels of oil released over certain numbers of days; if you look at the worstcase scenario that you have, what is the financial cost of that?

Peter Velez: We do not place a cost on that because our responsibility, in the unlikely case that we have an oil spill, is to clean it up and we are going to do whatever it takes to clean it up.

Q171 Caroline Lucas: Your business doesn’t think it is remotely relevant to work out how much money you might need to put aside to do that?

Peter Velez: We would have to clean it up and, again, I go back to my first point-I always look at the prevention part. I put a lot of emphasis on that. We have a sound cap and fill and a contain system that we have added for our Alaska operations.

Q172 Caroline Lucas: I don’t doubt that you have very good measures in place, but what I am saying is that accidents will always happen. BP wasn’t expecting the Macondo to happen, it happened. So when accidents happen, can I just be really, really clear that you are telling me that Shell does not have any estimate financially of how much that will cost you?

Peter Velez: We do not apply a figure to it because our responsibility, as a responsible operator, is to protect the environment and to clean it up, and we are going to do whatever it takes regardless of the cost to clean it up.

Robert Blaauw: The likelihood is indeed extremely, extremely small that such an incident will happen, in this case in offshore Alaska.

Q173 Chair: Cairn Energy wish to respond as well.

Richard Heaton: Essentially we are in a similar position. It is about putting in the most robust preventative measures and then making sure that you have robust response measures, and the responsibility is for us to clean things up.

Q174 Caroline Lucas: I just find it extraordinary that you wouldn’t, in your business planning, when you are looking at the risks to your investors and everybody else, that you wouldn’t have some figure that you might put on a worstcase scenario event. You can have as much preventative stuff-of course, we all want preventative measures in place-but we know occasionally the worstcase scenario does happen, and I just find it extraordinary that there is not a figure there that you could put on it.

Peter Velez: The answer that I have for that is we are responsible if something would happen. We are a responsible operator. We are going to do everything we can to prevent it. We have a great oil spill response system out there, along with our cap and fill, that contain-

Caroline Lucas: We will come to that in a minute.

Peter Velez: We already have the system out there and it is going to be working for us. Therefore all of that cost is already there, and it is just part of our overall operation and we are going to do whatever it takes cost-wise to take care of it.

Q175 Zac Goldsmith: There obviously is the chance of an accident, otherwise you wouldn’t be modelling the possibilities and taking the precautionary steps that you have already described, so you therefore accept there is a risk. I am echoing what Caroline said, it seems that given you are not talking about your money, you are talking about the resources invested in you by very, very many shareholders, you are saying that even though you accept there is a risk, even though it is a big enough risk that you would have spent time modelling the possibilities, you haven’t bothered to put a figure on it, you haven’t bothered to tell your shareholders how big that risk is. That seems to me to be hugely irresponsible financially.

Peter Velez: From my perspective, we know what the total cost of our operation is. We feel the likeliness of an oil spill is eventually very, very small. We are required-and we will do it anyway-to have the best oil spill response system out there.

Q176 Zac Goldsmith: You would not be doing that. Your shareholders would be paying for it, not you. The company will be writing the cheques, but this will have a direct bearing on shareholders around the world.

Peter Velez: I have a lot of responsibility for this area of the company, and I would not put my name or accept it if we did not have a sound oil spill response plan and sound oil spill equipment out there. I would speak up and essentially the company would clearly listen to it.

Q177 Zac Goldsmith: What is the risk, in your view? What is the risk of a spill happening in these waters?

Peter Velez: If you are talking about a spill, like a well control incident, I would say it is very, very small. These wells-

Q178 Zac Goldsmith: What would happen?

Peter Velez: Well, you never assign it. If you look at the Bureau of Safety and Environmental Enforcement, which is the bureau that regulates offshore drilling in the Gulf and in Alaska, they do environmental impact studies and when you look at the percentage of well control problems, we have not had a well control problem. We have said that there have been about 500 wells drilled in the Arctic that have not had a well control problem, so the risk is very small-the risk of a large well control problem. Probably the higher risk item is that you may have a leak or a release during a-

Q179 Zac Goldsmith: The US Mineral Management Service has estimated a one-in-five chance of a major oil spill occurring over the lifetime of activity, in just one block of leases in the Alaskan Arctic. One in five is what they are saying. How would you react to that?

Peter Velez: That is over thousands of lots in a 50-year period, if I am not mistaken. It is over a 50-year period, and I think the number that they are calling is for a spill that is in the area of about 1,000 barrels.

Q180 Zac Goldsmith: One in five in the lifetime activity in just one block of leases. We are talking about the one in five and then multiplying by the number of leases.

Peter Velez: I am very familiar with the statistics that you are calling and that is when they look at our whole area, like the Chukchi, but they have to bring it down to a block and then it is also over the whole life of the block.

Q181 Zac Goldsmith: Still you would have thought that would be a big enough risk to justify putting a cost on it, attaching a financial risk to it?

Peter Velez: No, because again our responsibility, regardless, is to respond to the spill and clean up the spill to whatever level it is.

Chair: Okay, we need to move on to some of the detail. I will turn, if I may, to Mr Aldous.

Q182 Peter Aldous: Yes, moving on to the oil spill response plans. I would just be interested from both of you, who scrutinises your plans for dealing with an oil spill?

Peter Velez: I will talk about Alaska specifically and then let the other witness talk about the Greenland one. For the Alaska one, the final approval authority is the Bureau of Safety, Environment and Enforcement, which used to be the Minerals Management Service. They are the final authority for approval of it and our Chukchi plan already has been approved by them. They undergo a very comprehensive review, and they include agencies, like the United States Coastguard, the National Oceanic and Atmospheric Administration, the US Geological Service. There was an interagency taskforce from the White House that reviewed this plan. The State of Alaska, the US Fish and Wildlife Service and other agencies of the Federal Government, and then in the State of Alaska you have the Alaska Department of Environmental Conservation and other state agencies that review it.

This plan was also published publicly and underwent public comment, which was then part of the comment period that the agencies review as part of it. Also it underwent a court review because it was challenged in court, and a court has reviewed it and approved it and said that the plan not only fully complies but it is a very comprehensive plan.

In my opinion-and I have seen many oil spill plans and worked around the world in many locations-this plan is the most comprehensively reviewed plan by a group of federal agencies that has undergone the most scrutiny of any oil spill plan in my 36-plus years with Shell.

Q183 Peter Aldous: Mr Heaton?

Richard Heaton: In Greenland, the plans are scrutinised by the Bureau of Minerals and Petroleum. They also engage the Danish Centre of Energy and Environment in scrutiny as well, independent scrutiny. Our plans are drawn up by, or in conjunction with, Oil Spill Response Limited, which are an internationally recognised company that supports many in the industry all around the world, so that is the level of scrutiny. We are not allowed to step forth and start operating without that plan in place.

Q184 Peter Aldous: Just picking that up, am I right in thinking that you didn’t publish your oil spill response plan when you first started drilling. It was only published last August and it rather contradicts what you have just said.

Richard Heaton: No. The plan that we have is always in place. It is a joint plan with the contractors who supply us with the equipment, who are the specialists, the government agencies with whom we work, and it is their document as well as ours. We are very happy to publish it, but that is not our decision alone. It is up to the Government because they are-

Q185 Peter Aldous: A response plan was in place when you started drilling?

Richard Heaton: Of course, yes.

Q186 Peter Aldous: A question to both Shell and Cairn, how often do you review your response plans because obviously you have research and development, we are learning more about ecosystems in the Arctic the whole time and, therefore, there is a need for continual monitoring and review, and I just wonder what the two companies do in that respect.

Peter Velez: I will answer for us, and this applies to our plans in many locations. Our plans, first, have to be reviewed and revised. We have an internal oil spill response; a manual that dictates to all our locations-and I was the author of it-along with our emergency response manual procedure for Shell globally, which dictates our review of oil spill plans, at least every three years, or unless something changes that impacts the plan. In the US, in addition to that, we also have a regulatory requirement that we meet and exceed, in which, if we have a change in anybody in the management team running the oil spill response operation, any change in the equipment that we have, any additional information that we have on the wells, or any new technology, we do our review.

The stipulation for our Alaska plans is that we have to do a review and resubmit it for re-approval every two years, and again that plan goes out to the federal government. The Bureau of Safety and Environmental Enforcement will publish that document, discuss it with the other agencies, and it also goes out for public comment, including villagers who commented on it. So that is an important aspect. We discuss the oil spill plan in the villages with the village residents. Environmental groups can also comment on it. Anybody that wishes to comment on it is able to see it and provide comments on it.

Richard Heaton: Obviously we are always looking to improve the plans that we have. The nature of the operation in Greenland is clearly very seasonal, so every time that we have a new operation then we will have to re-submit the plan with any updates that we have made at that stage. So the next time we become operational in Greenland, we will look at that particular area of operation that we are working in and the plan will be made so that it is in line with the local conditions there because each place is slightly different, in terms of who the contact people would be, in terms of the response and, indeed, potentially the sorts of equipment, where the location of the equipment would be, to make sure that that is taken into account, and any learnings from what is going on around the world with other operations too. In that sense, obviously the companies collaborate with specialist organisations, like OSRL and industry bodies.

Q187 Peter Aldous: You do pursue the same policies from country to country? You don’t say, "Oh the Americans have a tougher regime than it is in Greenland and, therefore, we can be less robust in Greenland"? You do pursue the same policies globally?

Richard Heaton: We do.

Peter Velez: Yes.

Q188 Caroline Lucas: I just want to take Mr Heaton back to the Cairn’s spill response plan. Can we just get on the record that-I think it is right to say-the drilling began on 1 June 2010, but the oil spill release plan wasn’t published until 15 August 2011? Is that right?

Richard Heaton: The precise dates I could not actually recall in the back of my head, but generally speaking that is correct.

Q189 Caroline Lucas: So what accounts for that? Could you just tell us a bit more about what accounts for that today because, as I understand it, it wasn’t Cairn itself that published it, when it was finally published, it was the Greenland Government?

Richard Heaton: That is correct.

Q190 Caroline Lucas: I don’t understand why there was such resistance for the 15 months beforehand, and how we would have any reassurance that, in the future, drilling would not happen when there wasn’t an oil spill plan that was in the public domain.

Richard Heaton: Well, the decision actually rests with the Government because it isn’t our document to release. It is actually-

Q191 Caroline Lucas: Were you encouraging the Greenland Government to publish it before you did?

Richard Heaton: We were happy for them to do it.

Q192 Caroline Lucas: Were you encouraging them to because you were obviously under pressure, and if it was up to them to decide were you encouraging them to make that public?

Richard Heaton: We were working, as we always do, with the Government to make sure that they were doing the right thing. It is their decision.

Q193 Caroline Lucas: So you were encouraging them?

Richard Heaton: We were working with them all the time to make sure that they could-

Q194 Caroline Lucas: I want to know whether you think there is a responsibility for the oil response plan to be out there at the beginning of the time when the oil drilling starts because, if an accident happens, the fact that it has not been in the public domain is an issue.

Richard Heaton: The important thing is that the oil spill response plan contains a lot of information, which the Governments themselves are keen to make sure that that is the right thing to release. There is a lot of information there, in terms of contact numbers, and what have you, that they are not always keen to release too early. It is their decision, therefore, as to when to publish that. The fact is that it has to be there and it has to be in place, and that is stipulated in the regulations that we work to, whether it be in Greenland or elsewhere.

Q195 Caroline Lucas: I suppose public opinion might be just a bit more reassured if they could see that it was in place, rather than have yours or anybody else’s assurance that it was. But let me move on to Shell because, as I understand it, your worstcase scenario model looks at a potential spill between around 7 August and 6 September, which only relates really to a summer spill scenario. Why is that the case? Are you assuming that a spill is impossible after September?

Peter Velez: No. I will address that question. To help put it in context, our oil spill plan is a plan for our whole drilling operation, which goes from the middle of July to the end of October. Essentially in the spill plan you have to model certain scenarios, and we essentially had to put the scenarios that the federal government agencies and the State of Alaska asked us to put. We have run multiple scenarios and we shared that with them. The Chukchi plan is over 400 pages in length. If you start putting scenarios for every day, the plan becomes unbearable.

Q196 Caroline Lucas: Would you acknowledge that the later you go in the year for that, for example, an October spill is more likely to be difficult to clean up than a June spill, because you have more ice, the weather is getting worse, the accessibility is worse.

Peter Velez: Not necessarily. When you look at it, the ice and some of the conditions at times may provide you with some assistance in responding to an oil spill, in the unlikely event that you have an oil spill. You have to remember there are many things up there also, that people try to sometimes focus on one or two things that are negative but there are a lot of things up there that are also very positive. For example, during the time that we are meant to be drilling, there are a good number of days when the visibility is going to be essentially 24 hours of daylight, so we can operate around the clock if we have to do our response. I have been in many parts of the world. I have been in the North Sea multiple times, and I can tell you the seas and the waves are a lot milder compared to seas that I have been in the North Sea.

Q197 Caroline Lucas: Are you confident that within your scenarios, you have modelled the worstcase scenarios?

Peter Velez: Yes. We have modelled the worstcase scenario, and I want to also-

Q198 Caroline Lucas: What does that look like?

Peter Velez: The worstcase scenario is a well control incident, and the way that that worstcase scenario is developed is that there is a calculation, which has been approved by the federal government, and we have to do that calculation. It has also been reviewed by the Society of Petroleum Engineers, which is a global organisation of petroleum engineers. So all that procedure has been already reviewed and approved by the Government. What we do, as part of our plan, is that our exploration plan is submitted to the Bureau of Safety and Environmental Enforcement, we do our calculation and there are many factors that go into it: the porosity of the rock that you are drilling though, the mud weight, the depth of the well, the pressures that you are going to encounter. You plug in all those parameters and you come up with a number. The Bureau of Safety and Environmental Enforcement, their own petroleum engineers also do a separate calculation of that to confirm our numbers, and if there is a disagreement then those disagreements have to be resolved. But that final worstcase scenario number is as approved by the federal government. It is not our number. They have to approve that number, and they have experts in their staff that are very knowledgeable. They have drilling engineers, petroleum engineers, reservoir engineers who are involved in that calculation the same way that our engineers do that. So it is a number that has to be approved by them. It is not a number that we just put on the table.

Q199 Caroline Lucas: Can I come back and look, in particular, at the techniques that oil companies are using or plan to use to clean up an oil spill, because we have had evidence put before us that would suggest that they won’t be effective in Arctic conditions or that they could, in themselves, cause further environmental damage. What research have you done to prove that the techniques that you are looking at using in a worstcase scenario would actually work in the Arctic?

Peter Velez: A very good question. We have done much work. In 2010, we completed the oil spill response in a joint industry project, which was a consortium of six companies and the work was led by the Norwegian Research Institute called SINTEF. It also included government agencies, like the Norwegian Government. At that time it was the Minerals Management Service that was involved in the research project and the Swedish Government and others were involved in this.

This was a four-year research project to continue advancing, in which we did test both at the small scale in the lab, lesser scale in tanks, and then large scales in field experiments in Svalbard. There we tested mechanical equipment. We did in-situ burning. We did dispersant application. All of the data has been released by the industry-

Q200 Caroline Lucas: I have seen some of it and it says things like, "Oil that has weathered more than six days in field conditions was unignitable and unrecoverable with mechanical devices". It says that "In-situ burning was only a viable option for approximately five days after oil is spilled and that it is not effective at all in 30% to 70% of ice conditions". In other words, what the JIP research appears to demonstrate is precisely that neither mechanical recovery nor in-situ burning will be effective in the situation of an Arctic spill.

Peter Velez: Let me further explain that and clarify it. You have to look and you have to have as many tools as possible when you respond to a spill. You touched on three of the tools: mechanical recovery, dispersants and in-situ burning. We have looked at all of those for our operations, and we always want to at least make sure we have one of those tools available. We feel very confident that in the weather conditions, and in the time that we are going to be drilling out there, that we are going to have it. Again we are going to be drilling out there during the open water season, mid July to the end of October. In the Chukchi Sea, to further answer part of your prior question, we are going to stop drilling through hydrocarbon zones by 24 September. That was a condition of the permit that was issued by the Bureau of Safety and Environmental Enforcement. So by 24 September, we will need to discontinue drilling through any hydrocarbon pay zones. Now we are also doing-

Caroline Lucas: Are you also-

Peter Velez: If you could give me one more minute, I would appreciate it. Right now there is another joint industry project that was started last May. That is again another multi-million project, over US$20 million. It is being administered by the International Oil & Gas Producers, and it is an oil spill response where we are even looking at further technologies for oil spill response. There is a lot of work that is ongoing. There is a lot of work that has taken place that is fully documented. It has been issued in reports and peer reviewed by people that are very knowledgeable about oil spill response, the science and academia.

Q201 Caroline Lucas: I am sorry to press you, but we have established that JIP says mechanical recovery is not going to be possible there. In-situ burning is going to be difficult as well. I know that you have been looking at capping and containment systems but, as I understand it, you have not tested that in icy conditions. Why hasn’t that been tested in icy conditions?

Peter Velez: We are going to have a capping and containment system that is going to be at the North Slope between the two drilling sites that we have available. We are-

Q202 Caroline Lucas: Have you tested it in icy conditions?

Peter Velez: We are finishing the construction of that system, and we are going to be doing some tests during the months of April and May. Then it is going to be located out there. That system will be tested under conditions that essentially will show us. I have been involved in use of containment systems over the years for pipeline repairs and other activities, and I can tell you-as my personal opinion, and from a lot of experience that I have-I much prefer to install a cap and kill system or a containment system, in 150 feet of water or less than in 5,000. You have to depend on remotely operated vehicles and you are working essentially over a kilometre in deep water. It can be done in 150 feet of water. You can even use divers to do some of this work, so it is a lot easier.

Q203 Zac Goldsmith: If I can, I just want to pick up briefly two points that you made that certainly don’t fill me with much confidence. Your submission says you are developing a capping system, but-and we can check that-in 2009 and 2010, Shell ruled out subsea well capping. I am just wondering, if it wasn’t appropriate then why is it appropriate now? Before you answer that, I have a second point that goes back to the point that Caroline was making in relation to in-situ burning. I understand that Shell’s view is that this would be effective in 70% to 90% ice cover, whereas I believe Cairn think that it would only be effective, as Caroline said-I don’t know who she was quoting-at more than 30% of sea ice coverage. There is a massive discrepancy there, both in terms of your two companies’ positions on the possibilities of in-situ burning, but also within Shell itself in relation to sea capping, so it would be useful if you could explain how we could have so many divergent opinions in the same sector and even in the same company.

Peter Velez: Okay. Within Shell, in 2008 and 2009 that was pre Macondo, pre Deepwater Horizon. Shortly thereafter, we were one of the founding companies that formed the Marine Well Containment Corporation, which essentially invested $1 billion in setting up a cap and killing containment system for the United States. For Alaska, we also quickly determined shortly thereafter that that was another mitigation or prevention feature that we wanted to add. At that time we made a commitment-it was to the MMS, which is now the Bureau of Safety and Environmental Enforcement-that we were going to have our own system for the Arctic, and we are following through with that commitment and we have incorporated it into our procedures. Again that is a learning that we had, and we were one of the leaders in the industry in the development of the system there and also in the development of the systems that are being done for the rest of the globe, essentially, as part of the International Oil & Gas Producers and OSRL, which is Oil Spill Response Limited located here in the UK.

Q204 Zac Goldsmith: You can see where we are going with this?

Peter Velez: Yes. So can I answer your second question before I forget?

Chair: Can I just bring in-

Zac Goldsmith: Actually, I wouldn’t mind hearing the second answer.

Chair: Okay.

Peter Velez: Let me do that before I lose my train of thought. The second part, you asked a very valid question on in-situ burning over 30% ice. What happens during in-situ burning, and I have been involved in those operations, you typically have to use an in-situ burn boom in open water. It is a specialised boom that has either specialised seals and materials on it, or it is water cooled. When you start getting into more ice, because the ice itself acts as a boom and contains the oil in between the ice itself and the funnel set, you may not even need to put a boom because the oil will thicken. If you go into the SINTEF website, which I mentioned to Mrs Lucas, there is also a video on there and it clearly shows you that experiments were done at Svalbard with higher concentrations of ice. You can look at the video and see the oil being burned and the efficiency of how it was burned, and there were multiple burns that were done.

Q205 Zac Goldsmith: Just before we move onto the next point, it would be useful to hear from Mr Heaton in relation to the in-situ burning. The submission we have suggests you attach very much less faith to this method than Shell. The difference is between 70% and 90%, whereas your company is talking about 30% sea ice coverage. Can you comment on that before we move on?

Richard Heaton: It comes back a little bit to the same point that Peter is making and maybe there is a little misunderstanding of what is in our document. As I understand it, in sea states up to 30% ice then the booms are easily deployable, and so up to that point you are able to corral the oil and make it available for in-situ burning by bringing it together. Above that, the ice itself acts as the means of entraining it. Once you get above 70%, then essentially the ice itself is acting as a very large boom.

Peter Velez: In fact I have one more comment, because I think it is relevant to what you are asking. Typically when you are working in a temperate environment or warm environments, your capability to say, for example, burn oil lasts maybe about two days. When we are working on these cooler environments, one of the advantages that we have is that you have less evaporation of the oil, less of the volatiles, the lightings, flashing off. Therefore, your window of opportunity is more like five, seven days, so your opportunity to burn the oil before it absorbs more water is much larger, which is an advantage. So it is one of those pluses that we see.

Q206 Zac Goldsmith: I am going to continue the line of discussion again that Caroline started looking at some of these other methods, because both Shell and Cairn’s plans contain information about the time it takes to drill a relief well in the event of a blowout. I am looking at the estimates that it can take 34 days to drill a relief well. Shell puts it at 38 days. But BP took 85 days to drill a relief well for the Macondo burn, so it will be useful again to know why would you be in so much of a stronger position than BP was?

Peter Velez: A deepwater well like Deepwater Horizon Macondo is a well that is drilling in 5,000 feet of water down to over 18,000 feet. You typically have about seven or eight casing strings of pipe, so it is pipe you draw to a certain depth or a certain mud weight and then you have to set casing. You go to the next depth with a certain mud weight and you have to set casing and go forwards. It is almost like a telescope that you expand.

In deep water, these wells take typically 90 days or more to drill. There are wells in deep water that have taken up to six months sometimes to drill-and these are 18,000 foot depth wells. The wells that we are drilling in the Arctic are 8,000 to 10,000 foot wells. Lower pressure, much lower mud weights and we typically have, at most, three casing strings, so you only have three casing strings.

What happens when you go to drill a relief well is that you do not have to run logs, the electronic logs to see where you are going to set casing, and so on, because you have already drilled the hole that caused the well control problems. You have a lot more knowledge, so you are able to move on a quicker basis to drill a relief well than if you are drilling the initial hole.

Q207 Zac Goldsmith: Just to be clear, are your assessments based on the assumption that it would be the rig itself, the effective rig that would host this new relief well process?

Peter Velez: We have two options of rigs, so that is a great question. The first option is the rig itself that we would use either in the Chukchi or the Beaufort. It has a very quick disconnect system, so in less than a minute it can leave the location and essentially get off location. So our primary means of drilling the well is going to be to use the drilling rig that was there. We have a second blowout preventer set with a rig. We also have a second set of casing and a second set of drill pipe that comes with each of those rigs, so we don’t have to wait for other equipment to come.

In addition, if we had a problem at one location, we would immediately stop operations at the other location, temporarily put the plugs into that well and start moving that second rig over to the first location. We made that commitment to the federal government and that is our plan. The first rig that is there, in the unlikely event that something happens to it, we have the second rig that we can bring in, and for both rigs we have back up equipment that we will be carrying and having available up there, plus we also have a cap and contain system up there. The cap and contain system will also be immediately mobilised within a few days, and we will start installing and working that part of it.

Q208 Zac Goldsmith: We have a quote here in some evidence that was submitted. The Pew Trust has said that there isn't any evidence, anywhere in the world in history, where a rig involved in a catastrophic well blowout was able to drill its own relief well. Do you agree with that?

Peter Velez: I respectfully disagree with that statement. The rig itself is capable of moving off very quickly, and the equipment that we have as backup equipment can be used. We have gone through that-

Q209 Zac Goldsmith: After the session, would you be able to provide us with clear evidence that this is technically possible, drawing ideally on some case studies?

Peter Velez: Yes. What I would add is that that is also part of the review process of the exploration plan by the Bureau of Safety and Environmental Enforcement, so they have reviewed that procedure and that is part of their approval process of the exploration plan.

Chair: I think Cairn just want to talk about dispersants.

Q210 Zac Goldsmith: It is linked, so let me just ask a question before we come to that because there are various other mechanisms here. I mean Cairn, for example, your plans include cutting chunks out of ice, the polluted ice, and melting them in heated warehouses. Given the scale of what we would be looking at, it almost doesn’t merit comment, but it just seems to me that all the mechanisms that have been put forward-whether it is caps, whether it is the relief wells, the ability for the affected rig to do that kind of operation, whether it is this cutting out of polluted ice that we have just heard, whether it is in-situ burning-this is very, very unsure science, which is why we have had such a variance, such a divergence of opinion, even within the sector. It doesn’t seem to me that there is anything really that the industry has said in its submission, or today, to reassure people-including shareholders, who stand to lose financially-that you are in any way positioned to handle an emergency. It is all guesswork. It is very hard to see a more positive spin on it, given all the evidence that has been sent. That is a statement not a question.

Richard Heaton: I think, taken individually and out of context, it maybe makes it sound one thing. But the truth is that we have to have a whole array of methods at our disposal, which are set out in the oil spill response plans, to deal with a whole range of sizes of spills. Clearly some techniques are very much more applicable to a set of conditions that we find ourselves in than they are to others, so every method that is shown there could be of use at some stage. You would have to choose what is most appropriate for the spill that you have at the time. There are many, many factors that will affect that, including the size of the spill, the nature of the fluids involved in the spill, the weather at the time, the sea state, the ice state and where exactly it is, relative to equipment and facilities. I think we would say that our plans have been scrutinised by the experts around the world, and various Governments. They are plans that are robust because they have the multiple solutions for spill response, and that is the same in the Arctic as it is in other places around the world.

Q211 Zac Goldsmith: I will make one more point. Again, I suppose I am just adding to what seems to be a very uncertain case. I have a quote from Admiral Robert Papp Junior. He is a senior official at the US Coastguard, and he said, "There is nothing up there-the Arctic-to operate from at present. No way we could deploy several thousand people as we did in the Deepwater Horizon spill". So the response to the Gulf of Mexico spill involved, I am told, 6,500 vessels and tens of thousands of personnel. What can you say to contradict the view of the US Coastguard? If you needed to get 6,500 ships and 50,000 people to mount a response, how on earth are you going to be able to do that?

Peter Velez: I would be glad to answer that. To clarify, Commandant Papp is a top official in the United States Coastguard, so he is the top person in the United States Coastguard. If you look at further statements that he has made, his agency has carefully reviewed and scrutinised the plans and he has made subsequent statements that essentially state that, based on the Coastguard’s review of the Shell Oil spill response plan, they feel confident that we have the equipment and the capability to respond to a spill. As the operator of the well, we are required to have all the oil spill response equipment to respond to a spill that meets the criteria of the spill up there. If we had an unlikely oil spill related to a well control event, it would be completely different than what happened in the Gulf of Mexico, so you cannot expect that you are going to need to have the resources that they had in the Gulf of Mexico, and when you read "6,500 vessels" that included small vessels, canoes and things like that that were part of it.

You have to understand the issue, and if you look at further comments that have been made by Admiral Papp it was very clear, and they are going to have some assets up there. The Coastguard will have a cutter up in Alaska, along with personnel up in the Barrow area and near the drilling operations during the drilling season this year, and they have made that commitment already.

Q212 Mark Lazarowicz: How far and how far would you rely on the state, the federal authorities or the Coastguard to assist you in the event of an oil spill? How far would you expect?

Peter Velez: We have to have all the equipment, all the personnel and all the contracts in place to respond as the operator. That is required by the Oil Pollution Act 1990, and the regulations state that the operator is responsible for putting in all the equipment. The way that the Coastguard comes in, the State of Alaska comes in, and the North Slope Barrow, is that if you have an incident, in the unlikely event of a spill, you form what is called in the United States an Incident Command System. The Incident Command System is led by an Incident Commander and a unified command, which includes a senior member of the Coastguard, typically at admiral or captain level, somebody from the State of Alaska and somebody from the North Slope. Those three, along with the responsible party, which is the Shell Incident Commander, are the four reviewing the operation and making the decisions on the oil spill response operations that are taking place. But all the equipment itself has to be provided by the operator. We have to provide it and, as I said, we have dedicated equipment up there, along with the crews and the trained personnel that practice all the time.

Q213 Mark Lazarowicz: My reason for asking that was in the event of further developments off Greenland, would the Greenland Government-this is for Mr Heaton-have that kind of capacity to respond in the same way as the US and Alaskan authorities?

Richard Heaton: I think the Greenland Government is able to draw on the Danish Government, and in fact relies heavily upon the Danish Government to supply, as they have done, coastguard ships for helping out in our operation. We have run our operations out of Peterhead and the North Sea, so there is a huge amount of ability from the North Sea operational centres to be able to assist in Greenland too, if need be.

Q214 Mark Lazarowicz: It is quite a way from northern Greenland, isn’t it?

Richard Heaton: In terms of sailing time, it is actually about 12 days.

Q215 Zac Goldsmith: My very final question. It has been suggested that Shell have been lobbying the Canadian Government to drop its requirement to drill relief wells at the same time as the main well. Is that accurate?

Robert Blaauw: I don’t think that is accurate. Any review has kind of offered for companies to come forward-

Q216 Chair: So kind of; can you clarify "kind of"?

Robert Blaauw: Sorry?

Chair: Did you say "kind of"? I misheard what you said. I thought you said "has kind of". Perhaps I just misheard, sorry.

Robert Blaauw: Okay, sorry. They have offered to companies to come forward with alternatives that provide the same risk cover as the subsea relief well, like for instance capping. That case was made by the trade association in Canada. Shell has no operations in Arctic offshore Canada. It has been an observer and it has not made that claim.

Q217 Zac Goldsmith: You support the Canadian Government’s position at the moment, the current requirement to drill both at the same time? Formally and on the record, you support that position. You are not lobbying to have those-

Robert Blaauw: We support the position as it is. As we don’t have operations there, we have no other point to make on that requirement.

Chair: Thank you. Caroline wants to return to dispersants.

Q218 Caroline Lucas: Before I return to dispersants, can I just be clear about one thing that you were saying about the subsea capping system. Can I be really clear that you said that you are building it to be ready for the 2012 drilling season in Alaska, but can you clarify whether it will actually be tested in icy conditions?

Peter Velez: The thing is that there are no icy conditions during the season that we are going to be drilling.

Q219 Caroline Lucas: In which case, does it not make sense to not drill until you have been able to test your response equipment in icy conditions to know that it is going to work? The worry, you will understand, is that if you are drilling now, without knowing whether your subsea cap is going to work or not, then if it doesn’t we have a real problem.

Peter Velez: My opinion on that is, no, the system is essentially a mechanical system. We are going to do testing in open water season. It is going to be the test, and all the work that we do is going to be witnessed and there are going to be representatives from the Bureau of Safety and Environmental Enforcement.

Q220 Caroline Lucas: But the issue of doing it in ice is really crucial; knowing that it works in icy conditions is crucial, so would it not be prudent to postpone drilling until you know that you have a mechanism that will definitely work in icy conditions?

Peter Velez: My answer to that is I respectfully disagree. The system can be tested, just like any other system and we can prove that it works.

Q221 Caroline Lucas: But over the Deepwater Horizon tragedy, essentially, we saw so many times that this cap just did not work for various reasons. How are we going to have any confidence that the cap that you are building will work when we haven’t tested it in some of the conditions that it is likely to be in?

Peter Velez: Because we are going to be testing this cap with the type of equipment that we are going to be using, we feel very confident that it will work-

Q222 Caroline Lucas: But not in icy conditions.

Peter Velez: Well, we will also have ice management vessels. As part of our operations, we have an ice management fleet that is able to manage and move the ice or break the ice if necessary around our location, in case it is needed. The equipment that we have is ice class vessels. We have ice class tugs, ice class breakers, ice class oil spill response vessels, so these vessels are capable of operating in ice conditions, and with the capacity and the capability that they have, if we needed essentially to break the ice, it doesn’t impact that, because keep in mind that that capping system and containment system goes near the sea floor. There is no ice in 150 feet of water sitting down there or where this equipment goes. So essentially we will have access there if we have to have access, but we will not be drilling during the time that there is ice at the location. We have to move off the location.

Q223 Caroline Lucas: Let me come to the dispersants, because again this was one of the examples where there were different analogies coming from different places. So Cairns say that dispersant effectiveness will decrease as the viscosity of oil increases. In other words, that it is going to be more difficult in Arctic temperatures. An organisation called Platform says that the use of chemical dispersants is all but impossible under ice. I wonder what Shell’s view is of that?

Peter Velez: I will not apply dispersants under ice. I don’t think anybody would tell you that. So I agree with whoever you are quoting that said that you do not want to apply dispersants under ice. But dispersants can be applied in cold weather. We have done tests as part of the dispersant. Part of the joint industry project that was done with SINTEF, that joint industry project where they are doing further work. The Bureau of Safety and Environmental Enforcement has also done their own studies, which are also available from their website, that show that dispersants are also effective in cold water. As a matter of fact, I saw an example yesterday over at Excel. There were a couple of papers presented on the effectiveness of dispersants in cold water by Norwegian scientists, and again it is confirming the data that has been out there. These papers are published. They are peer reviewed, and they are done by knowledgeable people with a lot of experience. I would say I would not apply dispersants if you have complete ice coverage. I don’t think I will challenge that because I don’t challenge it, but there are different mechanisms to apply dispersants by either vessel or aircraft-

Q224 Caroline Lucas: Does Cairn agree with this analysis?

Richard Heaton: We certainly have dispersants as part of our plans, so-

Q225 Caroline Lucas: Your position, as I understand it, is that you acknowledge that in icy conditions they are much less effective, which seems to be the opposite from what Shell are telling us.

Richard Heaton: I think there are different sorts of dispersants and, potentially, the industry is developing new techniques all the time.

Q226 Zac Goldsmith: But if you are working in icy conditions, you are obviously likely to use the best possible dispersant available on the market at the time in those conditions. Your position is that it is much more difficult to use even the best dispersants available, in icy conditions. Shell is saying, as I understand it, that it is equally possible to use them.

Richard Heaton: No. They are possible to use.

Q227 Caroline Lucas: Are they more difficult to use in icy conditions?

Richard Heaton: Than in very warm conditions, it is slightly less effective but it is still effective otherwise we wouldn’t be using them.

Q228 Dr Whitehead: The companies drilling and prospecting are clearly competing for business. To what extent are you actually sharing best practice on environmentally sensitive drilling and responding to spills and so on? Is there a particular forum through which this is done or is that done on an informal basis?

Peter Velez: I will answer first, if you don’t mind. Essentially the way that I look at it, we compete with other companies on information, on getting licences, on reservoir interpretation, seismic interpretation. When we are looking at the safety of our workers, the public and our employees, or protection of the environment, I do not compete in that area. So all the information that we have we make available to others. We are working right now on this joint industry project, this new one. I am the chairperson of the executive committee for this multimillion dollar global oil spill response in the Arctic, a joint industry project. We share information. I made a presentation yesterday at Excel, at Excel’s conference centre, on the project itself. We share information and we plan to share information as we go on, and we share with the Governments also and the public. So it is an area that we feel is for advancement and we are looking for new ideas.

The advantage that we also have is that it brings all the experts from around the world, so we have companies from around the world, scientists from around the world, working on these projects that are the best available out there. Therefore, you have the best minds together working on these projects, including academics that bring their knowledge and experience into it. So to my mind the bottom line is to me it is a non-competitive area, and in Shell I have the full liberty to share information with other companies and operators at any time.

Q229 Dr Whitehead: So the information coming from Macondo, the lessons learned from that, for example, Cairns, you state in your written evidence to us you have reviewed the plan programme to ensure that any lessons learned from the Gulf of Mexico are captured. I think you put a list of seven things of a programme put in place. How many of those were you not doing before Macondo? How many of those things arose from the lessons learned from that episode?

Richard Heaton: The majority of the processes that we have in place were indeed already in place. We reviewed our plans and strengthened them as a result. I think that there are many, many differences between the way that we approached it, in terms of we were already working with a dual rig strategy in Greenland, so that we were always drilling with two rigs. Our blowout preventers had a great many more degrees of redundancy, in terms of how many rams were available and how many separate independent systems were available to be able to operate those rams. We already had a more rigorous testing programme for those rams, but we made it yet even more rigorous. So I think a number of agencies looked at our preventative plans, our drilling plans-including independent consultants. They came to the conclusion that our plans were well ahead of any regulations that were in place. For the United States, where the Macondo accident happened, the degree of rigour that we worked to in Greenland was already a long, long way ahead of that that was applied for that particular incident in the Gulf of Mexico, so we were already well ahead of that. We put yet further enhancement on that on our own operations, so went even further than we had already gone.

Q230 Dr Whitehead: Would that have arisen from the result of, say, industry sharing so that you were informed by best practice-

Richard Heaton: Indeed so. BP have shared and been a part of sharing lessons learned from that incident and other incidents, and I fully support Shell. We work together. Shell are operating as part of a group of companies at the moment in Greenland, which includes ourselves, to do work on gathering information on behalf of the whole industry, because it is more cost effective to gather it together, and we do share that information. In areas where it is of benefit for safety, and safe and prudent operations, the industry is very collaborative, and obviously there are areas of competition too. But we work in joint ventures as well a lot of the time where we share information, even on the other aspects too.

Q231 Mark Lazarowicz: You mentioned the difference between the Macondo incident and the procedures in Greenland. We discussed the regimes mainly in Alaska, USA, Greenland and in Canada: are there any major differences in the approach taken in those three jurisdictions as far as dealing with possible spills and control exploration is concerned?

Peter Velez: On the oil response part you have to have different equipment, so equipment that works in deep water. Some of it is similar, for example, if you apply dispersants or burn, but when you are working in cold weather conditions or in shallow water you have to have different equipment, not only drilling equipment but also your capping equipment and your oil spill response equipment.

Mark Lazarowicz: I meant between the three jurisdictions in the Arctic-

Peter Velez: Oh in the Arctic sorry, okay.

Mark Lazarowicz: Are there major differences between the regimes that operate there in the three states?

Peter Velez: For example, between Greenland and Arctic Alaska, Arctic Greenland and Arctic Alaska are one of the-

Chair: Okay. Well, at this stage we do have the Division Bell, which we were expecting. We are going to have to curtail our session. We have almost reached the end, so I would like to bring it to an end here. Just to say that we very much look forward to receiving the further written submissions, which you undertook to give us. On behalf of the Committee, I thank you very much indeed for your attendance this afternoon.

Prepared 22nd March 2012