What On Earth Are We Doing Looking For Oil In The Arctic?
Shell is back in; Statoil is pensive, but eager; and Russia is pushing ahead. Low prices have stunted exploration, but the Arctic is still a hotbed (read: marginally warm-bed) of activity. With so much to lose in the fragile and costly environment, why are we there?
One – albeit simple – answer numbers around 90 billion or 1,670 trillion depending on your business. The United States Geological Survey estimates that the area above the Arctic Circle holds 90 billion barrels (bbl) of undiscovered, technically recoverable oil and 1,670 trillion cubic feet of technically recoverable natural gas. That’s good for 13 percent of the undiscovered oil and 30 percent of the undiscovered natural gas in the world. Still, it’s not easily accessible – or easy to market – with most of the hydrocarbons occurring under the inhospitable and often frozen Arctic seas.
Another – more hopeful – answer involves the belief that the Arctic offers some semblance of a path toward energy independence. More specifically, for the largest consumer of all, the United States. US Arctic production began in earnest in the mid 70s following the ’73-74 oil embargo by the Organization of Arab Petroleum Exporting Countries, which sent prices up over 75 percent. Project Independence, as the Nixon Administration designed it, aimed to promote domestic energy independence, including the Trans-Alaska Pipeline System. Ultimately, the efficiency and production initiatives sent oil imports tumbling more than 50 percent by 1985.
Related: Arctic Oil On Life Support
Today, US shale has revived the nation’s hope of energy independence – no matter how off base it may be. Still, the Arctic’s role in furthering this goal is yet to be determined. Its oil-to-gas ratio – approximately 3:1 in favor of gas – limits any widespread appeal. Moreover, the Obama administration has been hesitant to expand leasing opportunities, instead favoring the Atlantic coast and Gulf of Mexico.
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