Friday, March 15, 2013
When you upset the government, it is hard to overcome the damage to your reputation and business. That is the position Shell is in after its unsuccessful attempts to drill in Arctic waters. Government's unhappiness stems from an apparent lack of preparation for working in such a harsh environment. In Shell's defense, however, few have ever tried to find petroleum that far north. No one quite knew what to expect. Now, the company knows, and it has both engineering and political challenges. Shell almost certainly was hoping for a different outcome. It ventured north with an understanding that it must be careful not to disrupt the environment or pollute it in any way. The company was confident it had mastered the sea and the weather. It didn't turn out that way, and now Shell must modify heavily, if not start over in its approach. Is it worth it? The company needs to make that calculation. Either way -- writing off the venture as a loss or continuing on -- are bound to be expensive in monetary and reputation terms. It is not a pleasant position to be in.