• 2 hours Getting out of oil .. now
  • 5 hours Surprise! Aramco Scraps International Listing Plans
  • 2 hours Too much or doable - $900 Billion Annual Investments Needed In Renewables By 2030
  • 1 hour U.S. Arrests Iranian Over Alleged $115 Million Sanctions Evasion Scheme Involving Venezuelan Housing Project
  • 9 hours EU Proposes Online Turnover Tax For Big Tech Firms
  • 1 hour The Facebook/Cambridge Analytica Scandal
  • 8 hours Country With Biggest Oil Reserves Biggest Threat to World Economy
  • 7 hours "Rock star of science" - Stephen Hawking, Who unlocked The Secrets Of Space And Time, Dies at 76
  • 3 hours CERAweek Meeting
  • 21 hours 2020 - Electricity From Renewables Will Be Cheaper Than From Most Fossil Fuels?
  • 2 hours Nuclear Bomb = Nuclear War: Saudi Arabia Will Develop Nuclear Bomb If Iran Does
  • 10 hours Step forward or blackmail? DJT: Tariffs On Steel and Aluminum Will Only Come Off If New Fair NAFTA Agreement Is Signed.
  • 8 hours McDonald's Sets Greenhouse Gas Reduction Targets
  • 3 hours Bad seven days for Martin Shkreli
  • 21 hours Terminator plans to sue big oil for 'first degree murder'
  • 21 hours Statoil Changes Name
Alt Text

Chinese Oil Production Hits Record Low

China is becoming increasingly dependent…

Alt Text

OPEC Might Move Goalposts On Output Cut Deal

OPEC and its allies discussed…

Colin Chilcoat

Colin Chilcoat

Colin Chilcoat is a specialist in Eurasian energy affairs and political institutions currently living and working in Chicago. A complete collection of his work can…

More Info

Trending Discussions

What On Earth Are We Doing Looking For Oil In The Arctic?

What On Earth Are We Doing Looking For Oil In The Arctic?

Shell is back in; Statoil is pensive, but eager; and Russia is pushing ahead. Low prices have stunted exploration, but the Arctic is still a hotbed (read: marginally warm-bed) of activity. With so much to lose in the fragile and costly environment, why are we there?

One – albeit simple – answer numbers around 90 billion or 1,670 trillion depending on your business. The United States Geological Survey estimates that the area above the Arctic Circle holds 90 billion barrels (bbl) of undiscovered, technically recoverable oil and 1,670 trillion cubic feet of technically recoverable natural gas. That’s good for 13 percent of the undiscovered oil and 30 percent of the undiscovered natural gas in the world. Still, it’s not easily accessible – or easy to market – with most of the hydrocarbons occurring under the inhospitable and often frozen Arctic seas.

Another – more hopeful – answer involves the belief that the Arctic offers some semblance of a path toward energy independence. More specifically, for the largest consumer of all, the United States. US Arctic production began in earnest in the mid 70s following the ’73-74 oil embargo by the Organization of Arab Petroleum Exporting Countries, which sent prices up over 75 percent. Project Independence, as the Nixon Administration designed it, aimed to promote domestic energy independence, including the Trans-Alaska Pipeline System. Ultimately, the efficiency and production initiatives sent oil imports tumbling more than 50 percent by 1985. Related: Arctic Oil On Life Support

Today, US shale has revived the nation’s hope of energy independence – no matter how off base it may be. Still, the Arctic’s role in furthering this goal is yet to be determined. Its oil-to-gas ratio – approximately 3:1 in favor of gas – limits any widespread appeal. Moreover, the Obama administration has been hesitant to expand leasing opportunities, instead favoring the Atlantic coast and Gulf of Mexico.

A third – and more likely – scenario is that it’s actually necessary. Long regarded as the final frontier of oil and gas exploration, the Arctic’s time may well be at hand. 2014 was a down year for oil and gas discoveries, but so were 2013, 2012, and 2011. Last year the volume of new finds fell to their lowest level in at least the last two decades, marking the fourth consecutive year of such decline. Simply put, finding oil is getting harder.

Until now, US shale oil has largely masked the commodity’s diminishing exploratory returns globally. Minus the production of US shale, the global crude oil supply has fallen by nearly 1 million barrels per day since 2005. That trend is set to continue as North American output is projected to carry global growth – though less markedly –through 2016, amid further declines in OPEC, Russian, and North Sea production. This sets up what will be an interesting, and important, close to the decade for Arctic oil – the positioning for which is already underway. Related: If Shell Backs Out, Arctic Oil Off the Table for Years

In the US, Shell is making a return to the Arctic after a brief hiatus. After years of litigation Shell received some good news on February 12, when federal regulators upheld the company’s Chukchi Sea lease and revised the recoverable reserve estimate upward to 4 bbl from 1 bbl. The State of Alaska will soon levy the final decision, but Shell is ready to begin drilling this summer.

Canada, Denmark, and Norway have all advanced their Arctic positions, but Russia remains the most active littoral state. Aside from its already functioning operations in the Barents Sea, the Yamal LNG project – which is progressing on schedule – and burgeoning partnerships with China and India, Russia is actively expanding it’s military presence in the region. The Kremlin will construct ten airfields by the end of the year and increase its special forces presence by more than 30 percent – objectives that NATO warns make it the most operationally capable Arctic nation.

Expertise and efficiency will take time, but look for Arctic volumes to offset global declines sooner rather than later.

By Colin Chilcoat of Oilprice.com

More Top Reads From Oilprice.com:

Back to homepage

Trending Discussions

Leave a comment
  • Lee James on February 18 2015 said:
    This article raises many good questions. It concludes with the thought that going after Arctic oil is inevitable.

    The polar region strikes me as an area of not only extreme temps, but also murky international boundaries. As Colin suggests, Russia will show no hesitation about going after the resource. That is deeply disturbing, even if some of us think the U.S. should leave the Arctic and its buried resource alone.

    It all speaks to the need for the planet to get off of fossil fuels. We need to step-up the transition to alternatives.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News