Amyris launching biopharma platform
IHS Automotive forecasts 88.6M unit global light vehicle market in 2015; 2.4% growth

Arctic oil on life support

by Nick Cunningham for Oilprice.com

Oil companies have eyed the Arctic for years. With an estimated 90 billion barrels of oil lying north of the Arctic Circle, the circumpolar north is arguably the last corner of the globe that is still almost entirely unexplored.

As drilling technology advances, conventional oil reserves become harder to find, and climate change contributes to melting sea ice, the Arctic has moved up on the list of priorities in oil company board rooms. That had companies moving north: Royal Dutch Shell off the coast of Alaska; Statoil in the Norwegian Arctic; and ExxonMobil in conjunction with Russia’s Rosneft in the Russian far north.

But achieving the goals of tapping the extensive oil reserves in the Arctic has been much harder than previously thought. Shell’s mishaps have been well-documented. The Anglo-Dutch company failed to achieve permits on time, had its drill ships run aground, and saw its oil spill containment dome “crushed like a beer can” during testing. That delayed drilling for several consecutive years.

However, the first month of 2015 has darkened Arctic dreams even further. Oil companies are scratching their heads trying to figure out how to deal with a collapse in oil prices, now below $50 per barrel. With virtually every upstream company around the world slashing spending, it is the highest-cost and riskiest projects that are getting scrapped first.

Statoil, the semi-state-owned oil company from Norway, has been an offshore leader and Arctic pioneer. After having watched Shell fumble its Arctic campaign, Statoil put its drilling plans off the coast of Alaska on ice. But now with rock-bottom oil prices, Statoil has even shelved Arctic drilling plans in its own backyard. Bloomberg reported on January 29 that Statoil does not plan on drilling in the Barents Sea this year. It also let several Arctic exploration licenses off the coast of Greenland expire.

In December, Chevron suspended its drilling plans in Canada’s Arctic indefinitely.

In Russia, Arctic dreams are also going to disappoint, although for different reasons. Last year, Rosneft—operating in conjunction with ExxonMobil—announced a major discovery in the Kara Sea. Rosneft’s Igor Sechin said that the field could hold as much as 730 million barrels of oil. "This is our united victory, it was achieved thanks to our friends and partners from ExxonMobil, Nord Atlantic Drilling, Schlumberger, Halliburton, Weatherford, Baker, Trendsetter, FMC,” Sechin said in a statement. “We would like to name this field Pobeda,” the Russian word for victory. [Earlier post.]

But western sanctions may delay the victory. ExxonMobil is prohibited from working with Rosneft, and had to wind down its operations shortly after the discovery was announced. Worse for Rosneft, ExxonMobil was the one that had the drilling rig under contract, apparently the only platform that would work for the well.

Reuters reported on January 30, 2015 that Rosneft would have to delay drilling until 2016 at the earliest. “There will be no drilling in 2015. There is no platform and it is too late to get one. The project was initially created for Exxon’s platform,” a Rosneft source told Reuters. ExxonMobil has already pulled its platform out, and has it under contract until July 2016. Drilling may not begin for another year or two, and production from the world’s most northerly oil field will not begin until sometime in the 2020’s, barring other setbacks.

That leaves Shell, the company with the spottiest Arctic record. Shell announced $4.16 billion in fourth quarter profits, a decline from the previous quarter, but a decent showing relative to its peers. Nevertheless, the company also announced $15 billion in spending cuts over the next several years. “The macro environment has moved against us,” Shell CEO Ben van Beurden said after releasing the quarterly figures.

Curiously, however, amid all the spending reductions, Shell hopes to once again return the Arctic, after a two-year hiatus. Perhaps that is because of the sunk costs—Shell will spend around $1 billion on its Arctic program whether or not it is drilled because of all the ships and other logistics already under contract. Shell still needs to obtain several permits and clear legal hurdles, but if all goes according to plan, the company could begin drilling this summer.

It is up to Shell then to keep the oil industry’s Arctic dreams alive.

Source: http://oilprice.com/Energy/Crude-Oil/Arctic-Oil-On-Life-Support.html

Comments

kelly

Over and over, comments are made about the EXTREME COSTS of Arctic/miles deep oil drilling and the greasy cows came home.

nordic

A reminder, that oil is not scarce and never will be. Current levels of worldwide oil production/consumption are beyond comprehension; and can rise indefinitely as long as the price supports the marginal cost of production. The oil industry has capital and infrastructure to support vast growth.

Nonetheless, biofuels and other alternatives will eventually succeed. Its just that the cost target is moving.

Engineer-Poet

Oil "isn't" and "never has been" scarce; it has "just cost too much to extract".

"Costs too much" should be the definition of scarcity.

SJC

Shell botched their attempt last year. Like the guy from Shell said decades ago, we can get the oil, it will be harder to find and cost more. We have to decide when it is diminishing returns and time for a change.

gorr

Please reduce consumption by first buying a used small car like a geo metro or a spark or yaris. From there drive slow and ask tata car company to invent an engine with even better efficiency and market this car in north-America. Hydrogen addition should be studied to help gasoline burn rate after top dead center for added horsepower and less drag on the engine. Im pretty sure that 5% or more hydrogen addition mix can increase mpg by 20%. Very high mpg and horsepower are the way to go for greener emission, lower fuel cost and lower fuel consumption. When you increase one parameter, you increase all the other parameter in one big shot.

The comments to this entry are closed.