Even as the ice melts, drilling in the Arctic gets tougher
September 28, 2012 | posted by The Institute
Posted by Brad Plumer
As the world warms, the sea ice in the Arctic has been melting faster and faster with each passing year. Energy companies, in turn, have rushed in to exploit the newly uncovered oil and gas resources in the polar regions. But these Arctic prospectors are finding that drilling can be tough going — in part because they face growing opposition.
Safety equipment that Shell Oil volunteered to put into place for drilling off the coast of Alaska is complicating the company’s quest to reach oil-bearing rock during the short open water drilling season this year. (Philiip A. Dwyer/Associated Press)
Last week, Royal Dutch Shell announced it was abandoning plans to harvest oil off the coast of Alaska this year, after the company sustained damage to a spill-containment dome. The setback came after Shell had spent $4.5 billion and nearly seven years obtaining leases to drill for oil in Alaska’s Chukchi and Beaufort seas. Shell said it would instead drill a handful of preliminary “top holes” to prepare for drilling in 2013.
Shell’s stumbles this summer have made other companies leery. Norway’s Statoil is holding off on drilling off Alaska’s coasts until Shell proves that it can be done. And, on Tuesday, the CEO of French energy company Total, Christophe de Margerie, told the Financial Times that energy companies should just avoid drilling for crude in the Arctic altogether, at least for now. If a spill occurred in the region, he noted, it would prove extremely difficult to clean up in the frozen, treacherous waters.
“Oil on Greenland would be a disaster,” de Margerie said. “A leak would do too much damage to the image of the company.” (It’s worth noting, however, that Total still has a few natural gas ventures in the Arctic off the coast of Russia — the company claims that gas leaks are easier to deal with. And most of Total’s major competitors, including ExxonMobil and ENI, are all looking to drill for oil off Alaska, Russia, or Greenland.)
Then there’s the political backlash to Arctic drilling: Ben Geman reports that six Senate Democrats, including Majority Whip Dick Durbin (D-Ill.), wrote a letter to Interior Secretary Ken Salazar on Tuesday asking him to cancel all further planned sales of oil and gas leases off the coast of Alaska for 2016 and 2017.
“Challenges with infrastructure and spill response are unprecedented in the Arctic’s remote, undeveloped region,” the Democrats wrote in their letter (pdf). ”The Arctic Ocean is characterized by hurricane-force storms, 20-foot swells, sea ice up to 25 feet thick, sub-zero temperatures and months-long darkness … In the event of an oil spill, the response may be too slow, and irreversible damage to ecosystems and species could result.”
The Obama administration has so far been cautiously supportive of Shell’s endeavors in Alaska, albeit under heavy regulations. It’s unclear whether Durbin’s letter will alter the Interior Department’s stance at all.
Yet, as Kiley Kroh of the Center for American Progress points out, similar concerns have been popping up with increased frequency. Last week, a British parliamentary committee called for a halt to Arctic drilling until more infrastructure could be put in place to address any possible spills. (She also offers up this useful video giving an overview of the lack of infrastructure in the Arctic.) Earlier this year, one German bank declared that it would not finance Arctic drilling, saying that the risks were too great.
Even so, it’s unlikely that energy companies will be deterred that easily. The oil and gas resources are too vast to ignore. Shell’s geologists have said that their leases in the Chukchi Sea could one day yield 400,000 barrels of oil per day — about 7 percent of all current U.S. production. And a recent report from Nomura Holdings estimated that oil in the Chukchi and Beaufort seas could eventually yield $10 billion in value for Shell.