In his column in our September issue, Bill Pike writes about the Arctic’s oil and gas potential. We are well aware of Shell’s drilling hiccup in Alaska on New Year’s Eve 2012 when the Kulluk, a conical drilling unit, ran aground off Alaska. Since then oil and gas companies have been abandoning the area.
Companies have given up rights to 584,000 acres in Alaskan Arctic waters, or nearly half the 1.3 million acres under lease in the Beaufort Sea in 2007. In his column, Pike cited Michael LeVine, senior counsel at conservation group Oceana, who said, “companies cannot operate safely and are walking away from leases they bought. There is no reason to offer additional leases in the Beaufort Sea.”
Companies have put a hold for now on Arctic exploration because of its high costs and seasonal weather variability. This, combined with the recent shale production boom and other exploration projects, is why we have seen an exodus from the Gulf.
But the potential prize in the Arctic is perhaps too big for companies to ignore. There are an estimated 27 billion bbls. of oil and 132 tcf of gas in U.S. Arctic waters. Pike writes that the stage should be set for a return to the area and some predict that Shell may return to the Arctic in 2015.
The Obama administration appears to have some interest in promoting Arctic development. A lease sale in the Chukchi Sea is tentatively set for 2016. In late July, the administration invited oil companies and other interested parties to indicate what parts of the Beaufort Sea should be included in a 2017 lease sale.
Pike believes that long-term development of the Arctic is almost certain because the potential payoff is just too big. And if the 2016 and 2017 lease sales produce good results, OSV operators may want to get ready for increased Arctic operations.