Playing the Shell game for Alaska drilling

It has taken seven years, reams of red tape, prolonged litigation, and $4.5 billion, but Royal Dutch Shell is finally on the verge of drilling for oil in the energy-rich American Arctic.

Last August, Shell received conditional approval from the U.S. Department of Interior to drill wells in the Chukchi and Beaufort Seas, and drilling could be underway in a few weeks.

It may well have been worth the wait. The U.S. Geological Survey estimates that 25 percent of the world’s remaining undiscovered conventional oil and natural gas reserves are located in the Arctic, most of it in offshore reservoirs. America lays claim to about a third of these reserves, with Russia and Canada accounting for most of the rest.

To be sure, drilling in the Arctic is not for the faint of heart. In winter, temperatures can plummet to 56 degrees below zero, and the ice-free drilling season is usually limited to July through October. Last year’s bitterly cold Arctic winter left behind an unusually thick ice pack that is only now thawing to the point where it won’t interfere with drilling.

At times, the regulatory climate in Washington must have seemed as frigid as anything Shell has encountered in the Arctic. After much back and forth, Shell and the Environmental Protection Agency (EPA) appear close to resolving a dispute over emissions of ammonia and nitrous oxide from the company’s drill ship, Noble Discoverer.

For its part, the Coast Guard has raised concerns over whether Shell’s oil-recovery barge, Arctic Challenger, can withstand the severe storms that occasionally pummel the Chukchi and Beaufort Seas.

With the global price of oil expected to remain high for the foreseeable future, the American Arctic could energy as a prime source of domestic energy. The area is thought to be able to yield up to 400,000 barrels of oil a day. Every barrel produced from Arctic oil is a barrel not imported from the Middle East or anyplace else.

With its major Siberian oil fields in decline, Russia is turning its attention to the energy-rich seas in its vast Arctic regions. Russia’s state-owned oil company, Rosneft, has recently signed agreements with Exxon Mobil and Italian energy giant Eni to jointly explore several offshore sites, including several in the Arctic.

The race is on, and if the United States wants to secure its energy future, recover from the recent recession, and further free itself from the shackles of Mideast oil, it will have to take its Arctic resources seriously. Advances in seismic 3-D surveys and improvements in drilling technology could transform the Arctic into America’s next energy frontier.

This article first appeared in National Journal’s Energy Experts Blog and was picked up by Real Clear Energy.

Categories

About the Author: Craig Rucker

Craig Rucker is the executive director and co-founder of CFACT.