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Obama Slams The Door On Future U.S. Arctic Drilling
Obama Slams The Door On Future U.S. Arctic Drilling
The Obama administration officially shut the door on Arctic drilling, a move that could prevent any new drilling for years to come.
The U.S. Department of Interior announced on October 16 that it would cancel two lease sales for offshore acreage, which had been scheduled to take place in 2016 and 2017. Environmental groups have been doggedly criticizing the Obama administration for allowing Royal Dutch Shell to drill in the Arctic to begin with, citing the potential catastrophe if an oil spilled occurred. They had called upon the President to deny any permits to Shell.
But it wasn’t environmental protest that killed off Shell’s drilling campaign. What really forced the Anglo-Dutch company to retreat was low oil prices and disappointing drilling results.
Similarly, the Obama administration is now shutting the door on future lease sales not because of concerns over the environment, but “In light of current market conditions and low industry interest,” as Interior put it in a statement.
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On its face, the move is a logical one. Few other companies were interested in drilling in the Chukchi or Beaufort Seas, despite several having purchased leases years ago. Statoil and ConocoPhillips, two other large oil companies interested in the Arctic, had previously put their Arctic ambitions on ice because of the difficulty and high costs associated with drilling in the region. With Shell announcing that it would suspend U.S. Arctic exploration for the “foreseeable future” there are now zero companies that are viably interested in drilling anytime soon.
Remarkably, however, the interest in new leases had dried up even before the downturn in oil prices. Interior said that it put a “Call for Information and Nominations” in September 2013, which is essentially a way for the government to solicit interest from the industry on which areas to auction off based on their interest.
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Shell ends exploration in Arctic near Alaska ‘for the foreseeable future’
Shell spent upward of $7 billion US on offshore development in Chukchi, Beaufort seas
Royal Dutch Shell will cease exploration in Arctic waters off Alaska’s coast following disappointing results from an exploratory well it just completed.
Shell found indications of oil and gas in the well in the Chukchi Sea about 120 kilometres off Alaska’s northwest coast, the company said Monday in a release from The Hague, Netherlands. However, the petroleum was not in quantities sufficient to warrant additional exploration in that portion of the basin, the company said.
“Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the U.S.,” said Marvin Odum, president of Shell USA, in the announcement. “However, this is a clearly disappointing exploration outcome for this part of the basin.”
Shell will end exploration off Alaska “for the foreseeable future,” the company said.
The decision reflects the results of the exploratory well in the Burger J lease, the high costs associated with Alaska offshore drilling and the challenging and unpredictable federal regulatory environment in offshore Alaska, the company said.
Shell Oil Co. President Marvin Odum, seen on Sept. 2 in Anchorage, said it was “a clearly disappointing exploration outcome for this part of the basin.” (Mark Thiessen/The Associated Press)
Shell has spent upward of $7 billion US on Arctic offshore development in the Chukchi and Beaufort seas.
Monday was Shell’s final day to drill this year in petroleum-bearing rock under its federal permit. Regulators required Shell to stop a month before sea ice is expected to re-form in the lease area.
The company reached a depth of nearly 2,075 metres with the exploratory well drilling in about 45 metres of water.
Environmental groups oppose Arctic offshore drilling and say industrial activity and more greenhouse gases will harm polar bears, walrus and ice seals.
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Shell Approval May Trigger Resource Race In The Arctic
Shell Approval May Trigger Resource Race In The Arctic
In a few short months Shell will (re)enter the Chukchi Sea. The oil and gas major still awaits approval from a number of state and federal agencies, but in early May the company received the consent of the Obama administration to explore the remote Arctic sea 70 miles off the coast of Alaska.
Source: Nicolas Rapp, Fortune
If it sounds familiar, that’s because it is. Shell was in the Chukchi and Beaufort Seas for much of 2012 – a stint that ended with more headaches than drilling. Following some high-profile failures with its Noble Discoverer and Kulluk rigs, Shell put its Arctic operations on pause in early 2013. Amid slumping profits, the group called off its 2014 plans to resume. Today, the economic indicators are not much better – Shell lost $1.1 billion in the Americas in the first quarter of 2015 – but the company is committed to moving forward.
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One of the richest sedimentary basins in the world, the Arctic Alaska Petroleum Province is estimated to hold approximately 28 billion barrels of technically recoverable oil and 122 trillion cubic feet of non-associated gas spread across Alaska’s continental shelf and rift shoulder.
For Shell in particular, it expects the Arctic to be its biggest source of crude oil globally within the next 20 years. Estimates vary, but the Bureau of Ocean Energy Management calculates the hurdle, or breakeven, price to be roughly $38 in the Chukchi Sea. With a profit margin of around 39 percent – probably generous – Shell could be earning $1 billion or more in annual profits for each 100,000 barrels produced per day at prices not much higher than today’s.
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