Shell Rushes Back Where Wise Men Fear to Drill

June 29, 2015

Obviously, drilling for oil in the Arctic is a stupid idea. A lot of people are angry with President Obama for approving the new effort by oil giant Shell, which is nudging a huge rig up the coast of Alaska toward the Chukchi Sea.

But context is everything.  The President has followed a pattern of choosing his battles carefully in relation to climate. The playing field is changing rapidly – and Shell’s efforts in the arctic, in light of the current global price for oil, seem ill advised.
I’m not the only one that thinks so.

CBC:

Imperial Oil and BP have delayed plans to drill for oil in the Beaufort Sea off the Northwest Territories.

In a letter sent to the Inuvialuit Settlement Region’s Environmental Impact Review Board on Friday morning, Lee Willis, Imperial Oil’s exploration operations manager, says the companies have suspended all regulatory work for the project.

They had hoped to begin drilling by the summer of 2020, the same year one of their two exploration licences expires.

“However, under the current licence term, there is insufficient time to conduct the necessary technical work and complete the regulatory process,” Willis wrote.

Pius Rolheiser, spokesperson for Imperial Oil, said economic considerations such as the price of oil did not play a hand in the decision, which sounds about right to Doug Matthews, an analyst and former oil and gas director for the N.W.T. government.

“Production from the Beaufort, if and when it happens, is so far in the future, even on their current timeline, that today’s price of oil is not really relevant,” said Matthews. “They’re obviously thinking much further down the road.”

Chevron Canada made a similar announcement last December, putting its plans to drill in the Beaufort Sea on hold and citing “economic uncertainty.”

Matthews said Imperial Oil and BP’s decision may have been partly influenced by a growing concern among energy companies with climate change, calling it a potential indication of a step toward “a post-petroleum world.”

“We seem to be seeing a more serious approach towards climate change,” he said. “This is part of a storyline that is starting to develop.”

I’ve posted several times about the current oil price situation, and the increasing suspicion among seasoned observers that what we are seeing now is more than just the latest market swing.

Bloomberg:

(Saudi Arabia’s petroleum minister Ali al-) Naimi and other Saudi leaders have worried for years that climate change and high crude prices will boost energy efficiency, encourage renewables, and accelerate a switch to alternative fuels such as natural gas, especially in the emerging markets that they count on for growth. They see how demand for the commodity that’s created the kingdom’s enormous wealth—and is still abundant beneath the desert sands—may be nearing its peak. This isn’t something the petroleum minister discusses in depth in public, given global concern about carbon emissions and efforts to reduce reliance on fossil fuels. But Naimi acknowledges the trend. “Demand will peak way ahead of supply,” he told reporters in Qatar three years ago. If growth in oil consumption flattens out too soon, the transition could be wrenching for Saudi Arabia, which gets almost half its gross domestic product from oil exports.

Last week, in a speech in Riyadh, Naimi said Saudi Arabia would stand “firmly and resolutely” with others who oppose any attempt to marginalize oil consumption. “There are those who are trying to reach international agreements to limit the use of fossil fuel, and that will damage the interests of oil producers in the long-term,” he said.

In the case Shell’s current Arctic foray, today’s oil prices make it pretty easy for the Obama administration to acoommodate an oil major’s rush to burn cash, while the real action is taking place elsewhere, as low oil prices fail to ignite further global demand, and we increasingly glimpse the outlines of a new normal, where drilling for exotic, expensive oil, in the arctic or elsewhere, ceases to make economic sense.

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11 Responses to “Shell Rushes Back Where Wise Men Fear to Drill”

  1. dumboldguy Says:

    Don’t forget the geopolitics involved—-it’s not just the economics. Shell and Russia are already drilling in the arctic and China has its nose under the tent.

    http://www.newrepublic.com/article/121769/obama-gives-conditional-approval-shell-drill-arctic

  2. jimbills Says:

    “The President has followed a pattern of choosing his battles carefully in relation to climate.”

    http://www.rollingstone.com/politics/news/obama-and-climate-change-the-real-story-20131217

    If “picking his battles” means actually increasing fossil carbon production during his administration, and promising more after it, passing the buck on issues like the Keystone pipeline, fighting hard to grow the global economy and strengthen corporate interests with items like TPP, refusing to take a leadership role in clarifying where the $100 billion/year for developing nations will come from (a key point to the success/failure of the upcoming Paris summit), all while making pretty speeches about climate change and setting decrees and promises most of which won’t take effect until he’s out of office for a decade (and when other administrations will have the opportunity to reverse or not honor them) – then, sure, his approach has been a “smart” one.

    • dumboldguy Says:

      Such cynicism. And wholly justified. Good article from Rolling Stone that tells it like it is, but it really shouldn’t be surprising. Hope and Change went out the door early on when Obama showed how much he loved Wall Street and how little change was going to take place.

      Politicians are politicians, and the system is the system, and all one can say is that it would likely have been worse if the Repugnants owned the White House. We can only hope that Hillary will turn out better.

      • jimbills Says:

        I doubt Hillary would be better:

        http://www.theguardian.com/business/2011/may/12/battle-for-arctic-oil-intensifies

        http://www.newrepublic.com/article/121191/oil-lobby-weighs-hillary-clintons-environmental-record

        And, sure, a Republican would be worse. How much worse depends on the specific Republican, though. I tend to doubt it would be much, much worse with either Romney or McCain (who are both more moderate than many Republicans) vs. Obama, but that can be debated. A guy like Cruz or Santorum in office would be a debacle, however.

        I’m not saying President Obama isn’t making an effort. He is, but his record shows a steady pattern of undercutting anything positive with something equally, or perhaps more so, negative. And yes, his hands are tied with Congress, but he’s fought far harder for TPP than he has for climate change behind closed doors.

        So, here’s what we’re stuck with in American politics regarding an existential issue like climate change – accept very modest action that will have little effect, or accept no action at all. Why should we be happy or satisfied with that?

        • greenman3610 Says:

          We shouldn’t be satisfied. We should be working our asses off to effect change, but we do have to recognize that the president is not a king, and not all powerful, and does have to balance constituencies – he is only half the equation. We are the other half.
          I maintain that the highest constitutionally defined office in our democracy is not President, Senator, or Congress person – but citizen.

          • dumboldguy Says:

            Hate to be cynical, but I must reject the contention that “…the highest constitutionally defined office in our democracy is not President, Senator, or Congress person – but citizen”.

            That was perhaps somewhat true until the Citizens United decision. Money spent by corporations is now in charge and the “highest”—-the Supremes ruled that the Constitution says so.

          • jimbills Says:

            Besides what DOG says, in that the individual citizen is overwhelmed in influence by the dollar bill (although this path in our nation pre-dates the horrible Citizens United decision), part of our “democracy” is holding our representatives to task. We shouldn’t treat President Obama with kid’s gloves when his actions go against his words – and it happens again and again in his case. Perhaps his “balanced constituencies” favor moneyed interests with greater weight than mine or yours.

            He’s not a king, or a dictator, but he should be fighting for the things he’s paid lip service to. What’s stopping him from rejecting Keystone? Why isn’t he rallying the developed nations to create a cohesive plan towards raising the $100 billion/year for developing nations – the only positive development of Copenhagen and what will be a key point in Paris?

            http://www.reuters.com/article/2014/12/15/us-climatechange-talks-idUSKBN0JT12920141215

            Why does he approve Powder River and drilling in the arctic when he knows darned well these actions contradict the goals of reducing future carbon emissions?

            Will the President approve TPP even if any climate change mitigation efforts have been completely neutered in not just it but any future trade agreement?

            http://www.nytimes.com/2015/06/25/business/trade-pact-senate-vote-obama.html

            “A separate bill bolstering trade enforcement rules — set for final passage in July — includes measures added late in the process to win conservative support, further complicating the president’s job. They include a provision prohibiting any trade agreement from forcing action by the United States on climate change”

            Constantly, we see money defeating concerns that affect us all, and all those who come after us. Obama might be “balancing constituencies” in these things, but he shouldn’t be patted on the back for it, or given a free pass for it, or forgiven for it – especially from those who disagree with it.

            (However – an awful thing to consider is that, perhaps, President Obama is as good as it gets in this screwed up nation.)


  3. […] David Barber is a fascinating speaker and great personality in the arctic ice world. His TED talk here dovetails nicely with the Stanford Research on Extreme weather profiled today, and yesterday’s piece on the risks of new Arctic Drilling. […]


  4. […] The New York Times now confirming what I’ve been posting about for some time. […]


  5. […] I’ve been posting for some time, Shell’s drilling in the Arctic was an exercise in very expensive futility, given the price of […]


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