The Arctic Remains a Tough Place to Make a Buck

September 7, 2015

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

In March, Jason Box and I attended The Economist magazine’s Arctic Conference in Oslo. The surprising thing about it was that, though I was expecting kind of a rah-rah Chamber of Commerce pep talk, what we actually heard were a lot of cautionary tales about how difficult and expensive the arctic can be for would-be exploiters.

In the video above, Ice expert David Barber of the U. of Manitoba talks about the issue.
If you are pressed for time, start at 9:14 for a paradoxical surprise – decrease in sea ice coincides with increase in hazards, due to new kinds of very unpredictable ice dynamics.

NYTimes:

In late August, a ferocious storm whipping through the Chukchi Sea forced Shell to suspend its drilling operations only a month after one of its two floating rigs drove a drill bit into the seafloor. The company resumed operations after the weather cleared. It was just the latest distraction in Shell’s long effort to tap one of the last remaining untouched giant oil reserves.

(Norway’s)Statoil pulled out in 2012, writing off more than $335 million in costs. Total wrote off $350 million last year and, according to Russian news accounts, returned its 25 percent share of the project to Gazprom in June.

The Arctic is at the core of the nationalist ambitions of Mr. Putin, who once said that tapping the region’s resources was as natural as hunting and harvesting berries and mushrooms.

Russia already operates the first offshore production platform above the Arctic Circle, called Prirazlomnoye, which began pumping the first commercial shipments from the Kara Sea in late 2013 and reached a modest two million barrels last year. The figures, however, are a fraction of the more accessible gas and oil reserves onshore, including the Yamal Peninsula in northern Siberia 900 miles east. Plans for more offshore projects have stalled, and Russia has shifted its focus onshore, especially following American sanctions that targeted offshore Arctic projects.

The Shtokman field, Mr. Putin has boasted, remains a prospect, but one for the next generation.

“As soon as they speak of the next generation, it means something is wrong,” Mr. Chuprov, of Greenpeace Russia, said. “In this country — in Soviet times, in czarist times — nobody thinks about the next generation.”

Despite Gazprom’s promises to resume drilling — in 2014, then in 2016 or 2019 — residents in Teriberka have become resigned about the boom that never was. The contractors who arrived in droves have departed, and the enormous embankment where Gazprom built a gravel road, encroaching on the village’s cemetery, comes to a dead end at a rocky cliff.

Below, some of the supporting material I’ve posted on this before.

The Economist:

The ice might be melting but megaprojects planned in the Arctic are coming to a grinding halt due to dropping oil prices, rising tensions with Russia and America’s new production capabilities. The icy ‘last frontier’ is expensive and hazardous for all industries and stakeholders are now weighing the return on their current and future investments. In addition indigenous groups and NGOs remain sceptical about the impact commercial activity will have on climate change, biodiversity and local communities.

The Scotsman:

Oil and gas explorer Cairn Energy today said it was focused on exploiting its “significant discoveries” off the coast of west Africa as it ruled out any further drilling in the Arctic unless it can bring in additional partners.

The Edinburgh-based company has a 40 per cent stake in three blocks off Senegal and is planning to submit further exploration and appraisal plans to the government in May, with a drilling programme due to start by the end of this year.

Cairn estimates there could be more than three billion barrels of oil waiting to be found off the coast of Greenland, where its activities have been criticised by environmental campaigners, but is seeking to reduce its interests in the Arctic.

The company holds an 87.5 per cent stake in the Pitu block in Baffin Bay and has taken a $22.7m impairment because it has “no firm plans for future exploration activity” in the region.

Thomson said: “What we’re going to do is focus on where we’ve encountered significant value – and that’s Senegal. We’ve been pretty clear that we’re not going to drill in Greenland at current equity levels as the capital exposure would be too large for a company of our size. We still have the acreage so let’s see what happens in the future, but in the meantime our job is to follow up on the significant Senegalese success.”

One Response to “The Arctic Remains a Tough Place to Make a Buck”

  1. Andy Lee Robinson Says:

    About a trillion tonnes less sea ice in the Arctic this August compared to last August.


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