In the spring, an oil company’s fancy turns to thoughts of… drilling for oil in the Arctic.
Tantalisingly close, yet for now just out of reach, is a brief moment — maybe a month, perhaps two — when holes can be sunk beneath ice-free waters in search of the industry’s last great frontier play — the Arctic. It has around 100bn bl of oil, according to University College London (UCL); the US National Petroleum Council (NPC) puts its reserves more than five times higher. This is enough to hold in thrall some of the world’s biggest exploration companies through times of lower-cost tight oil and lower priced crude.
Shell has previously said its arctic ambitions are not constrained by time, and that it looks at the region as a 30 or 40-year project. And so the company, undeterred by the memories of its mishap-filled campaign in 2012, hopes to be reacquainted with its most northerly leases this year. This week, the US Interior Department reaffirmed the company’s interests in the Chuchki Sea off Alaska. This year marks Shell’s ninth anniversary in the region. It has spent around $5bn there so far, but has not one completed well nor one barrel of oil to show for it.
But the frozen north is a great yearning — despite the expense, despite the attendant negative publicity and despite the unforgiving environment, Shell is not alone in flirting with northern exposure. Oil companies just can’t keep away, as the dreams of potential rewards override the threat of apparent risks.
All making eyes at the Arctic are Sweden’s independent Lundin Petroleum, Norway’s state-controlled Statoil and the Russian firms Rosneft and Lukoil, which are keeping up their push despite restrictive sanctions banning imports of the necessary equipment and technology. And London-listed Cairn energy still hankers after further drilling offshore Greenland, despite the eyewatering charge of $1bn it took in 2010-11 on unsuccessful exploration there.
The possibility of an emerging arctic oil industry is keeping lots of people busy. Conferences are being organised and lobbyists are lobbying like never before, to persuade hesitant politicians to ignore the noise from environmental campaigners. But where the explorers go, the activists will follow. Greenpeace, which called this week’s decision on Shell by the Interior Department “indefensible”, is trailing Shell’s arctic drilling rig Polar Pioneer across the Pacific on its way to the Chuchki Sea.
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