Obstacles Persist to Arctic Drilling

Obstacles Persist to Arctic Drilling
The mobile drilling unit Kulluk sits aground on the southeast shore of Sitkalidak Island about 40 miles southwest of Kodiak City, Alaska, in 40 mph winds and 20-foot seas Tuesday, Jan. 1, 2013. The Kulluk grounded following many efforts by tug and Coast Guard crews to tow the vessel to a safe harbor when it was beset by winter storm weather during a tow from Dutch Harbor, Alaska, to Everett, Wash. U.S. Coast Guard photo by Petty Officer 1st Class Sara Francis.

There are serious obstacles still confronting Arctic drilling, stated The New York Times in a recent expose. The article mentioned multiple issues, not the least of which are persistently low oil prices.

While the Arctic is believed to possess some of the largest untouched oil and natural gas reserves on earth, challenges to development are only mounting.

Many of the problems are political. After Russia was placed under sanctions last year for interfering in Ukraine, many companies were forced to abandon partnerships, including and ExxonMobil deal with Rosneft.

Other problems are related to the harsh environment, with deals cancelled in Alaska and Canada by Chevron and BP. Shell has invested heavily in the Chuchki Sea in north Alaska, but has lost hundreds of millions of dollars after its massive Kulluk drilling rig grounded due to harsh seas in 2012.

Compounding difficulties, environmental groups have mounted legal challenges to the work at every step. Activists have repeatedly tried to block in exploration ships off the Oregon coast over the past year. Sometimes encounters even turn extra-legal, Greenpeace is currently being sued by the country of Greenland for allowing activists to board drilling rigs and disrupt exploration work off its coasts, Reuters reported. Even though few fields off the coast have been found to possess commercially exploitable quantities of oil or gas, Cairn Energy has maintained an exploration presence for several years.

With such high costs, it’s unlikely there will be substantial development of the Arctic anytime soon, particularly with low oil prices seen today.

“The entire cost structure up there is three to five times more expensive than onshore lower 48,” said Scott D. Sheffield, chief executive of Pioneer Natural Resources, a Texas-based oil company.

These challenges have yet to stop Shell. The company currently has a fleet of at least 24 ships in the Chuchki Sea.

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