Risk Assessment of Shell's Deep Sea Oil Rig in Celebes Sea: MGT 60035

This report provides a comprehensive risk assessment of Shell's proposed deep sea oil rig project in the Celebes Sea. It begins with an introduction to Shell's operations and the project's context, highlighting the area's high-profile kidnapping cases and environmental significance. The report then outlines the risk management model chosen, the traffic light system, and explains its application to the project. The risk assessment itself details potential hazards associated with various stages of the project, including spudding, constructing the BOP stack, and drilling. Risks are categorized based on likelihood and impact, using a traffic light color-coding system, and include threats like kidnappings by the Abu Sayyaf Group, environmental impacts from offshore drilling, potential job reductions, and worker fatalities. The report also considers external factors, such as political instability, economic conditions, security concerns, social issues, environmental considerations, and technological limitations. It concludes with a justification for proceeding with the project, based on the risk analysis.

Risk Assessment
Name of the Student
Name of the Professor
Authors Note
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Table of Contents
Introduction......................................................................................................................................3
Risk Management Model and Reasons for Selection......................................................................3
Risk Assessment..............................................................................................................................4
Consideration of external factors.....................................................................................................8
Justification for proceeding.............................................................................................................9
Recommendation.............................................................................................................................9
Conclusion.......................................................................................................................................9
Reference List................................................................................................................................11
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Introduction
Popularly known as Shell the Royal Dutch Shell Company is a British and Dutch gas and Oil
Company is one of the major oil and gas companies of the world in terms of revenues. Shell is
involved in various activities connected with the oil and gas sector. These include trading,
generation of power, refining, production, distribution and marketing. The company is also
concerned with various renewable energy measures such as hydrogen, wind, biofuels and energy
kite system. The operations of Shell are spread over 70 countries in the world (Shell.com 2019).
Shell currently has plans to develop a deep sea rig of oil in the Celebes Sea. The area is notorious
for high profile kidnapping cases. Also, the area decided by Shell which is 500 km from the Sulu
islands in a southwards direction also has considerable environmental significance for the
fisheries located. The company is facing a dilemma regarding the project. While offshore
drillings will be beneficial for the overall revenues of the company the hazards associated with
the area are multiple. The present situation is not exactly safe given the existing terrorist
activities. This study makes an assessment of the risks associated with the project and clearly
outlines the future actions of the company based on it.
Risk Management Model and Reasons for Selection
A risk assessment focuses on an accurate examination of the situations at work which can harm
or cause injury to stakeholders. It is done with the purpose such that a company can weigh the
options and decide on the future course of action. A risk assessment is necessary since it ably
protects the business from potential losses and workers from harm. It also complies with the law
preventing litigations if any.
For this project, the traffic light system of risk assessment has been used. The traffic light
framework has clearly defined parameters by which the proper significance of the risks
associated with a forthcoming project is identified. Not only are the risks identified but the depth
of each risk is explained and analysed through the traffic light report. The risks are associated
with the red, amber and green colours of the traffic light. The red colour indicates that the
particular risk is of serious consequence to the project and can harm it in an extremely adverse
manner. It indicates that the particular risk has the capacity of disturbing the budget or schedule
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of the project on a large scale. It requires immediate actions from the higher authority associated
with the company (Naji et al. 2018). The amber colour code indicates danger at a medium level
wherein if the risks described are not addressed in a strategic manner can harm future operations.
The danger is, however, is not as severe as the risks associated with red colour coding. The green
colour coding of risk indicates that the specific risk has very little impact on the overall processes
proposed by the company.
The traffic light model is effective in providing a clear picture to the stakeholders with sufficient
clarity and clear indicators. These are helpful for critical decision making in any organisation.
Shell with its ambitions of establishing oil rig in Sulu will receive clear comprehension of the
various threats and risks associated with the project. The model will aid in the formulation of the
ultimate decision related to the project. The level of risk and the occurrence of its frequency are
taken into account while providing the colour coding of each element (Naji et al. 2018). The
parameters for deciding on the colour of each risk identified will convey a clear message to
stakeholders. The stakeholders will be able to take strategic and quick decisions without much
delay. The significance of the traffic light model is the utter clarity with which risks are analysed
and interpreted. It saves a lot of time for all concerned people effectively. The management is
able to identify the ways in which the risks can be controlled and managed if the project
proceeds. The overall health of the project is presented concisely. Hence this model has been
selected for assessing the risks associated with the critical project of Shell.
Risk Assessment
The process of setting up a deep sea oil rig consists of a number of activities and phases which
have been defined below. It must be noted that the risks discussed have the capability of
affecting the operations of Shell during any of this process.
Spudding – This is the first phase of the process where drilling is conducted in a location by one
of the drilling units which are portable. The process is then followed by even deeper drilling into
the ocean bed with reduced size in casings until the effective depth of drilling is reached.
Constructing the stack of BOP – After the casing is cemented and secured a guide base is
established on the sea base above the casing unit.
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Drilling – After the initials stage the drill collars and bits, the drill pipes, turntables work
together to cut through various rocks and dig wells which allow natural gas and oil to flow in via
the casings in a controlled manner.
There are numerous hazards associated with the drilling which includes lack of skilled
workforce, fatalities, pollutions and utilisation of types of machinery and drilling equipment.
Identified
Threat
Brief
Description
Level of
Consequence
Likelihood of
Occurrence
Risk Score
(Scale of 1-10)
Increase in
Kidnappings
and Hijackings
by ASG
Since March
2016 there has
been a spur of
activities in the
Sulu island area
of the Celebes
Sea. Abu Sayaf
Group pledged to
ISIS is primarily
responsible for
these activities
(Pomeroy et al.
2019). Some
local criminal
groups are also
involved.
The consequence
of the risk is high
since the group
has become
increasingly bold
targeting larger
vessels. The loss
of machinery
associated with
construction will
severely stunt the
growth of the
project
The likelihood of
occurrence is
high since a four-
point action plan
has been made
by the nations of
Indonesia,
Malaysia and the
Philippines but
the
implementation
has been
sluggish.
Score: 9
Level: High
Code: Red
Environmental
Impact
Offshore drilling
required for
establishing an
oil rig has
considerable
effects upon the
environment due
The level of
consequence is
moderately high
since the area is
an active local
site for fishing
activities. Oil
The likelihood of
this occurring is
moderately high
since these are
normal effects
when deep sea
drilling is
Score: 7
Level: Medium
Code: Amber
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to oil spills from
pipelines and oil
tankers (Ali et al.
2018).
spills can harm
the entire marine
life. Produced
water by drilling
is highly saline
containing
hydrocarbons
which are
unseparated. The
reputation of the
company will be
injured with
regards to social
responsibility.
conducted.
Reduction of
jobs in other
industries
Though some
new jobs will be
created it may
affect the
employment in
other sectors
such as
hospitality
(Lindsey, Nam
and Miller 2018).
A negative visual
appeal us created
for people
looking to enjoy
the beach
Level of
consequence is
comparatively
low since
ongoing terrorist
activities gas
significantly
reduced the
number of
tourists.
The likelihood of
this occurrence is
medium since a
negative impact
is created in the
psyche of people
visiting the
beach.
Score: 4
Level: Low
Code: Green
Fatality of
workers
It will harm the
fatality of
Level of
consequence is
The likelihood of
this occurrence is
Score: 6
Level: Medium
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workers due to
the nature of the
job (Sumaila
2018). Also, the
kidnapping
activities by
groups
associated with
ISIS are a reason.
medium since
such incidents
will harm the
positive image of
a famous
organisation like
Shell.
medium Code: Amber
Increase in terrorist activities – The Sulu area since March 2016 has become notoriously
reputed for reported cases of kidnappings (Brown 2019). While the culprits are mainly the Abu
Sayaf Group some local criminals are also responsible. Initially, slow moving and low vessels
like tugboats were targeted nut heavy load carriers are also being attacked. Kidnapping for
ransom has become a common activity in this area. There were continuous attacks on East
Malaysian fishing boats making it an unsafe area for future business.
Impact upon the environment – Offshore drilling results several types of pollution especially on
marine wildlife. Since the area of Sulu is a location for fisheries it is a source of livelihood for
local individuals. Fishing is an important activity in the area which will be affected by the
hydrocarbons released in the water due to drilling (Purbrick 2018). Shell which is an
international company should think deeply about its social responsibility before commencing on
the project.
Reduction of Jobs – The beaches will not have the same level of attraction for tourists of drilling
activities are established thus reducing jobs in the tourism and hospitality industry.
Fatality – The level of fatality associated with workers engaged with drilling is comparatively
high (Kelley, E. and Sherman 2018). Additional to this is the risk of terrorist activities which can
severely injure the workers associated with the future project of Shell.
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Consideration of external factors
Political – The political condition of Sulu – Celebes is highly unstable. It encompasses the water
around Indonesia, Philippines and the Sabah state of Malaysia. Regarding the terrorist and
kidnapping activities, the governments of all these nations, a four-point of action was decided
upon which was not implemented properly by Malaysia and Philippines in a specified time frame
(Lee 2018). This has led to several strict measures imposed on the coal shipments of the
Philippines from the government of Indonesia. Thus the surrounding nations of Sulu are not in
agreement with each other which can potentially threaten the project of Shell.
Economy – Coastal communities located around the Celebes and the Sulu Sea have reduced
levels of economic developments compared to national hubs (Suryadi and Timur 2018). This
makes potential grounds for illegal activities. However, Shell has an advantage since it can create
jobs in the area by executing this project.
Security – There is high maritime insecurity in this particular region owing to incursions in the
area of Lahad Datu. Kidnappings by Abu Sayaf Group and trafficking of wildlife are also some
of the illegal activities being carried out in this area making it extremely unsuitable for business
purposes. The governments of Indonesia, Malaysia and the Philippines have entered the
Trilateral Cooperative Arrangements which provide information sharing and coordinated patrols
(Lam and Pauly 2018). These are however yet to be rigorously implemented.
Social – The Sulu Celebes area is facing extreme poverty due to lack of governmental awareness
particularly in the areas of Indonesia and the Philippines (Blanchard 2018). This key cause has
resulted in overall corruption and illegal practices which are resulting in rapid depletion of
resources.
Environmental- Since this is a prime area for fishing and several fisheries are located it is an
impractical location for setting up oil drilling activities. Exposure to crude oil is highly toxic to
marine life and can severely affect the source of income for local people (Gerba 2019). Air
emissions related to oil drilling can cause respiratory problems for local people.
Technological – The technological condition of the area is extremely poor owing to the overall
poverty of the area and governmental ignorance. The government of the surrounding nations
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have not invested in enhancing the technologies of the Sulu Celebes area which will affect the
operations of the future project of Shell in a negative manner.
Justification for proceeding
There is very little justification for Shell to proceed in this project owing to the various risks and
threats associated. The nations are not decisive regarding the terrorist and kidnapping activities
taking place. Furthermore, there are internal conflicts between the nations owing to lack of
initiatives on the part of the Philippines. The economic conditions of the area are extremely poor
resulting in illegal activities and lack of proper resources if Shell proceeds with the project. The
marine life can be severely affected by drilling which can affect the condition of fisheries in an
adverse manner. Security measures provided by the government are not sufficient to combat in
case of any threat or emergencies. Except for the fact that some local jobs will be created due to
the project, Shell has almost no justification in proceeding with the project of setting up an
offshore oil rig in the area of Sulu.
Recommendation
Shell must not proceed in the matter of establishing a deep sea oil rig in the Rea of Sulu. The
extreme and brazen terrorist activities being carried out are one of the major threats. The
inactivity of the nations associated with the area is also one of the vital reasons since in case of
any threat there is very little help which might be received from the governments. The low
economic condition implies the scarcity of resources required for a business to proceed. The lack
of security is also a concern and a reason for Shell to reconsider their project. Shell is an
internationally reputed company engaged in activities related to renewable sources. Establishing
an oil drilling project in an area where fisheries are located can severely harm its reputation.
Conclusion
Progress has been made in the Sulu Celebes has been done but more concentrated efforts are
essential pertaining to the illegal activities in the area. The risk factors associated with the area
and the various hazards imply that in the current state and the near future there is very little
possibility of the project gaining profitability. Ensuring equitable distribution of services and
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goods in coastal communities may eradicate poverty and reduce the threats of illegal activities.
However, the area is of Sulu Celebes is still far behind in achieving a state where business
activities especially oil drilling can be conducted smoothly. Currently, it is not a feasible option
for Shell to proceed in this matter.
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Reference List
Ali, A.E.O.A., Liu, Z., Bai, Y., Farwa, A.G., Ahmed, A.S. and Peng, G., 2018. A stable gravity
downward continuation for structural delineation in Sulu Sea region. Journal of Applied
Geophysics, 155, pp.26-35.
Blanchard, D.C., 2018. Risk assessment: at the interface of cognition and emotion. Current
Opinion in Behavioral Sciences, 24, pp.69-74.
Brown, B.E., 2019. Complementarity among Regional Fisheries Bodies and Asian Large Marine
Ecosystems sustainability. Deep Sea Research Part II: Topical Studies in Oceanography.
Gerba, C.P., 2019. Risk assessment. In Environmental and Pollution Science (pp. 541-563).
Academic Press.
Kelley, E. and Sherman, K., 2018. Trends of the Large Marine Ecosystem assessment and
management approach as reflected in the literature. Ocean & coastal management, 155, pp.104-
112.
Lam, V.W. and Pauly, D., 2018. Status of fisheries in 13 Asian Large Marine Ecosystems. Deep
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Lee, Y., 2018. Maritime Merchandise Trade in Southeast Asia: Opportunities and
Challenges. Maritime Affairs: Journal of the National Maritime Foundation of India, 14(1),
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Naji, H., Xue, Q., Lyu, N., Wu, C. and Zheng, K., 2018. Evaluating the driving risk of near-crash
events using a mixed-ordered logit model. Sustainability, 10(8), p.2868.
Pomeroy, R., Garces, L., Pido, M., Parks, J. and Silvestre, G., 2018. Scaling an EAFM at the
Sub-Regional Level: Catalyzing regional and national actions in the Sulu-Sulawesi seascape.
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In Fish for the People Vol. 16 No. 3 (pp. 52-55). Secretariat, Southeast Asian Fisheries
Development Center.
Purbrick, M., 2018. Pirates of the South China Seas. Asian Affairs, 49(1), pp.11-26.
Shell.com. 2019. Shell Global. [online] Available at: https://www.shell.com/ [Accessed 31 May
2019].
Sumaila, U.R., 2018. Comparative valuation of fisheries in Asian Large Marine Ecosystems with
emphasis on the East China Sea and South China Sea LMEs. Deep Sea Research Part II: Topical
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Suryadi, M. and Timur, F.G.C., 2018. Fronting the Return of Foreign Terrorist Fighters: the Rise
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