Oil price rose on Tuesday…
Oil prices gained slightly on…
Norway’s state-owned oil major Statoil is closing its Alaska operations and will abandon its exploration and drilling leases in the Chukchi Sea north of the Bering Strait because work there is “no longer considered competitive within Statoil’s global portfolio.”
“Since 2008 we have worked to progress our options in Alaska. Solid work has been carried out, but given the current outlook we could not support continued efforts to mature these opportunities,” Tim Dodson, executive vice president for exploration in Statoil, was quoted as saying on Statoil’s website, posted on Tuesday.
The site said Statoil will exit 16 leases that the company operates as well as its minority shares in 50 leases operated by ConocoPhillips, all in the Chukchi Sea. All 66 leases were awarded in 2008 and expire in 2020.
Related: Why French Military Action In Syria Doesn’t Affect Oil Prices
Statoil’s decision marks the second withdrawal of a major energy company from the Alaskan Arctic this year. In September, after withstanding months of protests, Royal Dutch Shell abandoned its exploration of the Chukchi Sea. The Anglo-Dutch concern said it was disappointed in the results from its exploratory drilling.
Statoil acquired interest in the Chukchi leases for $23 million. Shell had spent $2.1 billion for its right to drill in the sea.
The withdrawal of Statoil from Alaska is part of an industry-wide effort to cut costs in the face of persistently low oil prices. One area for savings is the Arctic, which is believed to have enormous energy resources but is an expensive area in which to operate.
Related: OPEC’s Bad Bet By The Numbers
For example, Conoco Phillips said Tuesday that it put its Chukchi Sea operations on hold. And during its conference call on Oct. 29 about third-quarter performance, the Houston-based company said it plans to exit all deepwater exploration by 2017 to save money.
As for Statoil, spokesman Peter Symons said Shell’s experience had a major influence on his company’s decision to leave the Chukchi Sea. He said Statoil has lately been focusing on “financial strength and long-term performance,” and that the Alaska venture didn’t fit this goal.
“Based on current conditions in the market, in terms of price and the work that’s done in the area, that was the primary driver of the decision,” Symons told the Alaska Dispatch News.
Related: Saudis Planning For A War Of Attrition In Europe With Russia’s Oil Industry
A cautious Statoil has been following Shell’s lead in Alaskan waters for several years. In 2012, for example, Statoil officials said the company would not begin exploratory drilling unless Shell had demonstrated that it discovered oil fields rivaling those already being exploited in the Gulf of Mexico.
But soon after Shell ran into trouble in late 2012 near Kodiak Island, well south of the Arctic Ocean, Statoil announced that it might give up its leases in the Chukchi Sea.
That attitude was reflected at Statoil’s Anchorage office, the company’s only presence in Alaska. On Tuesday, when Statoil announced its withdrawal, only two employees worked there. Symons said he didn’t know whether the company would offer them other positions or simply lay them off.
By Andy Tully of Oilprice.com
More Top Reads From Oilprice.com:
Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com