Arctic Oil: High Risk, Low Price

Oil RigBy Kevin McGwin

The Arctic Journal

“The Leiv Eriksson is perhaps the most controversial oil rig anywhere on the planet.” That was the assessment made in 2011 by Ben Ayliffe, a Greenpeace activist, after he had boarded the rig to protest exploration in Greenlandic waters.

Four years later, it is another Arctic drilling rig, the Polar Pioneer, leased by Shell for its Alaska offshore programme, that is causing controversy. This time, though, the trouble is coming from two directions.

Like the Leiv Eriksson, the Polar Pioneer is a red cloth for environmentalists, who warn that the vast distances, cold water temperatures and short working season all make cleaning up a spill in the Arctic considerably more complicated than spills in temperate waters.

But unlike 2011, the price of oil this year is struggling to remain above $50 a barrel. Four years ago, a barrel of Brent Crude, an industry benchmark, averaged $111.

The current fall in prices, which began last summer, is a concern for oil firms: this year, industry-wide cost-cuts will total $180 billion, or 20% of 2014 spending. Another $200 billion in major projects, including deep-sea drilling, tar sands and a number of Arctic projects, have been delayed.

The combination of high risk, low price and falling investment has, according to Rystad Energy, an analysis firm, raised concerns in the industry of whether Arctic oil and gas resources will ever be produced.

“Rystad Energy does not expect many significant Arctic exploration campaigns in the short and medium term,” the firm wrote in March.

So why, despite the environmental and financial controversy associated with Arctic drilling, is Shell pressing on in Alaska?

Continue to full article . . .

Picture: Olav Gjerstad (Flickr: Olav Gjerstad) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)%5D, via Wikimedia Commons

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