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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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With Shell’s Failure, U.S. Arctic Drilling Is Dead
With Shell’s Failure, U.S. Arctic Drilling Is Dead
Arctic Drilling in the U.S. is dead.
After more than eight years of planning and drilling, costing more than $7 billion, Royal Dutch Shell announced that it is shutting down its plans to drill for oil in the Arctic. The bombshell announcement dooms any chance of offshore oil development in the U.S. Arctic for years.
Shell said that it had completed its exploration well that it was drilling this summer, a well drilled at 6,800 feet of depth called the Burger J. Shell was focusing on the Burger prospect, located off the northwest coast of Alaska in the Chukchi Sea, which it thought could hold a massive volume of oil.
On September 28, the company announced that it had “found indications of oil and gas in the Burger J well, but these are not sufficient to warrant further exploration in the Burger prospect. The well will be sealed and abandoned in accordance with U.S. regulations.”
After the disappointing results, Shell will not try again. “Shell will now cease further exploration activity in offshore Alaska for the foreseeable future.” The company cited both the poor results from its highly touted Burger J well, but also the extraordinarily high costs of Arctic drilling, as well as the “unpredictable federal regulatory environment in offshore Alaska.”
Shell will have to take a big write-down, with charges of at least $3 billion, plus another $1.1 billion in contracts it had with rigs and supplies.
Shell’s Arctic campaign was an utter failure. It spent $7 billion over the better part of a decade, including an initial $2.1 billion just to purchase the leases from the U.S. government back in 2008. The campaign was riddled with mishaps, equipment failures, permit violations, and stiff opposition from environmental groups, including the blockading of their icebreaker in a port in Portland, OR this past summer. The FT reports that Shell executives privately admit that the environmental protests damaged the company’s reputation and had a larger impact than they had anticipated.
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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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Senators Call For End To Arctic Drilling As Shell Gets Permits To Begin Work In Chukchi Sea
Senators Call For End To Arctic Drilling As Shell Gets Permits To Begin Work In Chukchi Sea
Shell received the final permits it needed to begin drilling exploratory wells in the Chukchi Sea last Wednesday, but a group of Senators led by Oregon’s Jeff Merkley is calling for a ban on Arctic drilling altogether.
According to the Associated Press, the permits are somewhat conditional: In granting the company the green light, the Department of the Interior said Shell can only drill the top sections of wells, or to about a depth of 1,300 feet, because critical emergency response gear, including a well-capping device in the event of a blowout or leak, will not be present for the foreseeable future.
The capping stack and other emergency gear is on board the MSV Fennica, which is in Portland, Oregon for repairs after Shell opted to send the ship out of Dutch Harbor, Alaska on July 3 via a shallow and evidently treacherous route, choosing speed over safety.
The Fennica is an icebreaker — a ship literally designed to break through ice, one of two such ships in Shell’s Arctic fleet meant to protect its drill rigs from unsafe ice conditions. But the Fennica somehow suffered a gash in its hull more than 3 feet long before even leaving the harbor and was forced to head immediately back to port.
There is no word on how long the repairs will take. When the capping stack is available to be deployed within 24 hours, aDOI spokesperson told the Associated Press, Shell can apply for an amended permit that would allow the company to drill deeper.
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Shell’s Renewed Arctic Drilling Campaign Faces Yet Another Setback As Key Ship Forced Back To Port
Is Shell finally “Arctic Ready” after its doomed 2012 campaign? The company is set to begin drilling in the Arctic within the week, and it’s already not looking good.
The MSV Fennica, an icebreaker vessel bound for the Chukchi Sea, had barely left its berth in Dutch Harbor, Alaska last Friday when it had to immediately turn around. The crew discovered a 39-inch long, half-inch-wide breach in the Fennica’s hull, FuelFix reports.
There is no word yet from Shell on how long the repairs are expected to take, or how the company intends to proceed in the event that the Fennica is taken out of service for a long period of time. Any significant change to Shell’s Arctic drilling plans could force a new review by the US Department of the Interior.
The Fennica was not only tasked with keeping ice from collecting around the company’s drill site, but also carrying the capping stack to be used in case of a well blowout or other emergency, in addition to the equipment for deploying it.
A Shell spokesperson told FuelFix that the incident does not “characterize the preparations we have made to operate exceptionally well.”
But that’s not going to stop comparisons to the company’s accident-prone and ultimately aborted attempt to drill in the Arctic three years ago.
“Shell’s terrible safety history around the world makes today’s news no surprise, but is nonetheless disturbing,” David Turnbull, campaigns director for Oil Change International, told DeSmog.
“For the sake of the Arctic and for our climate, the President should put a stop to Shell’s dangerous experiment today, before an even greater mishap inevitably comes.”
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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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Shell clears major hurdle for Arctic drilling
Exploration plan calls for 2 ships to drill up to 6 wells northwest of Wainwright, Alaska
Just days ahead of a planned protest of Royal Dutch Shell’s Arctic drilling program in Seattle, the company on Monday cleared a major bureaucratic hurdle to drill off Alaska’s northwestern coast.
The Bureau of Ocean Energy Management approved the multi-year exploration plan in the Chukchi Sea for Shell after reviewing thousands of comments from the public, Alaska Native organizations and state and federal agencies.
“We have taken a thoughtful approach to carefully considering potential exploration in the Chukchi Sea, recognizing the significant environmental, social and ecological resources in the region and establishing high standards for the protection of this critical ecosystem, our Arctic communities, and the subsistence needs and cultural traditions of Alaska Natives,” the agency’s director, Abigail Ross Hopper, said in a statement. “As we move forward, any offshore exploratory activities will continue to be subject to rigorous safety standards.”
Before Shell can begin drilling this summer, the company must still obtain other permits from state and federal agencies, including one to drill from the Bureau of Safety and Environmental Enforcement and government opinions that find Shell can comply with terms and conditions of the Endangered Species Act.
Shell spokesman Curtis Smith said the approval “is an important milestone and signals the confidence regulators have in our plan. However, before operations can begin this summer, it’s imperative that the remainder of our permits be practical, and delivered in a timely manner.
“In the meantime, we will continue to test and prepare our contractors, assets and contingency plans against the high bar stakeholders and regulators expect of an Arctic operator,” Smith said in an email to The Associated Press.
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