• 2 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 2 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 2 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 2 days Schlumberger Warns Of Moderating Investment In North America
  • 2 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 2 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 2 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 2 days New Video Game Targets Oil Infrastructure
  • 2 days Shell Restarts Bonny Light Exports
  • 2 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 3 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 3 days British Utility Companies Brace For Major Reforms
  • 3 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 3 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 3 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 3 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 3 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 3 days Rosneft Signs $400M Deal With Kurdistan
  • 3 days Kinder Morgan Warns About Trans Mountain Delays
  • 4 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 4 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 4 days Russia, Saudis Team Up To Boost Fracking Tech
  • 4 days Conflicting News Spurs Doubt On Aramco IPO
  • 4 days Exxon Starts Production At New Refinery In Texas
  • 4 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 5 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 5 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 5 days China To Take 5% Of Rosneft’s Output In New Deal
  • 5 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 5 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 5 days VW Fails To Secure Critical Commodity For EVs
  • 5 days Enbridge Pipeline Expansion Finally Approved
  • 5 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 5 days OPEC Oil Deal Compliance Falls To 86%
  • 6 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 6 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 6 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 6 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 6 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 6 days Aramco Says No Plans To Shelve IPO
Alt Text

Can Trump Drive A Wedge Between Saudi-Russian Alliance?

Trump’s Iran deal decertification threatens…

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

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

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