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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Canadian Prime Minister Bans Arctic Drilling… For Now

Trudeau

Canadian Prime Minister Justin Trudeau has defended his government’s decision to ban all drilling for oil and gas in the Arctic for the next five years—for starters—in response to a local mayor’s cries that the bank will cost jobs for communities, even though Big Oil can’t really afford to drill right now.

Trudeau referred to scientific data revealing that an oil spill in the Arctic would be much more difficult to deal with than anywhere else, but left a tiny window open for the oil industry. If Big Oil comes up with technology that can guarantee safe drilling in the Arctic, the ban could be reconsidered, he said.

It is clearly a window that won’t be opened in the next five years—an unrealistic timeframe for developing 100 percent safe drilling technology. In fact, it’s probably safe to say that there can be no 100 percent spill-proof drilling technology, so the ban is likely to remain in effect for more than five years.

While this is a sure victory for environmentalists and another demonstration of how committed the Canadian PM is to his liberal agenda, there are collateral victims: the Arctic communities that rely on the oil industry to earn a living.

“Our people have been working with the industry over 50 years on and off, we’ve grown skills, we’ve got good employment, our businesses have grown, the region has grown,” Darrel Nasogaluak, the mayor of Tuktoyaktuk on the coast of the Beaufort Sea, stated.

Trudeau responded by noting that while “one door of potential economic opportunity” has been shut, the government will work on all levels to open new doors. Those new doors, however, remain undefined and, as such, provide little peace of mind for the local communities affected.

At the same time, it’s important to point out that the communities are not currently affected by Trudeau’s ban because no one is actually drilling in the Canadian Arctic presently. This is all hypothetical. Related: Permian Drilling Costs Surge: Are The Days Of Cheap Oilfield Services Over?

Nasogaluak’s protest indeed concerns only a potential economic opportunity that may in fact never become a reality.

Arctic drilling is still very costly and success is highly uncertain, even if we leave environmental concerns aside. Big Oil has been dropping Arctic projects since the oil price crash, no longer able to afford working on them. In fact, not all of these projects were in an active phase of development.

Ottawa has made it even easier for oil companies to quit their Arctic plans. The government is currently preparing for consultations regarding the impact of the ban. It has already ruled out extending the drilling licenses that are bound to expire over the next five years, but it has also said oil company are free to ask for extensions, which is a little confusing since the extensions will not be granted.

There are six oil companies holding exploration licenses for Canada’s Arctic territories, including BP, Exxon, and Chevron. None of the companies are drilling: the price crash cut their plans short. All are trying to become leaner in the post-crash years, and are refocusing on smaller but higher-return projects. In short, nobody is prioritizing the Arctic. Related: Banking Giants Miss Out On Oil’s Biggest IPO

A manager from the Canadian Association of Petroleum Producers told the Barents Observer that the offshore oil and gas industry in the region has decades of experience and is fit to meet the challenges of Arctic exploration. This is unlikely to convince anyone that oil and gas drilling is completely safe, however.

On the other hand, communities that dependent on the oil industry for their survival are unlikely to be too concerned about the risk of oil spills. This is a question of priorities and these are priorities that are unlikely to be reconciled anytime soon, at least not until those new doors come into being and are inviting enough.

By Irina Slav for Oilprice.com

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  • Bill Simpson on February 21 2017 said:
    Why take the chance when they have all that oil sand? He OKs it, and one polar bear gets a drop of oil on its white fur, and he can kiss reelection goodbye. Look what happened to BP. They rushed a job and it cost them 60 big ones, while killing 11 workers. A spill like that in the Arctic would bankrupt any oil company. Every country around the Arctic Ocean would sue. They said that the Deepwater Horizon well would have leaked for a couple of years, had they not been able to shut it off. With that much oil leaking, some might have reached the Statue of Liberty. As it is, I once smelled the spilled oil near Slidell, Louisiana. That is over a hundred miles from the site of the spill.

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