A Deal with the Devil? Arctic Drilling War of Attrition Begins Part Two

A Deal with the Devil? Arctic Drilling War of Attrition Begins Part Two

Important Links

Last week we took a look at the companies interested in Arctic drilling as well as Greenpeace’s new anti-Arctic drilling video. This week we will take a look at the potential dangers of Arctic drilling.

For starters, the U.S. Energy Information Agency (EIA) cites several Arctic-drilling challenges including long supply lines and limited transportation access from the world’s manufacturing centers.

The EIA said that overlapping and disputed claims are also a problem, while the area north of the Arctic Circle is apportioned among eight countries: Canada, Denmark (Greenland), Finland, Iceland, Norway, Russia, Sweden, and the U.S.

However, Dr. Lassi Heininen, Professor at the University of Lapland in Finland, whose studies include Geopolitics, environmental politics, Russian studies and Arctic studies has a different take. While juxtaposing the current geopolitical situation there with the second half of the 1980s when companies could not operate in the Arctic due to the Cold War, Heininen told Energy Tribune that globalization makes Arctic drilling attractive now.

“The Arctic Council’s eight countries and observer states like China and Japan, make it stable to drill now. This could not have happened previously,” Heininen said. He added that China’s interest in the Arctic was a new development and the area’s wild card.

China is Arctic’s wild card

China is definitely a wild card in the Arctic but one with deep pockets. The country’s three state-owned oil majors are all listed on the top 100 of the Fortune Global 500 while Sinopec and CNPC are number four and five respectively. China’s three oil majors have total combined revenue of nearly $1 billion and the backing of Beijing who has the largest cash reserves in the world of more than $3.5 trillion. Consequently, look for China’s Arctic interests in the future to intensify.

Perhaps the greatest challenge for oil companies in the Arctic will be a PR war of attrition since public opinion is already mounting against Arctic drilling. Secondly, environmental challenges do indeed pose real ecological dangers, including preservation of animal and plant species unique to the Arctic, particularly tundra vegetation, caribou, polar bears, seals, whales, and other sea life.

On the PR front, Greenpeace knows how to hit a bulls-eye. When discussing companies’ attempts to drill for Arctic oil, it says: “These companies are risking oil spills in fragile Northern waters. Think of Deepwater Horizon, but add remote, dangerous, stormy seas to the mix – the consequences are too horrible to imagine.” Without question, that’s an image hard to get out of one’s mind.

An oil major’s take

After a border agreement was reached two years ago between Russia and Norway in the Barents Sea, part of the Arctic Ocean, Hege Marie Norheim, Senior Vice President of northeastern areas exploration and production for Norway’s Statoil acknowledged that environmental concerns exist.

She said that Statoil is already operating in the area (more than 80 Statoil exploration wells have been drilled in the Barents Sea) and complies with “the strictest environmental standards in the world.”

Norheim added that a government-sponsored study had concluded that Statoil’s presence in the Arctic would reduce the total risk of spills reaching shore, since the measures the company provides would protect the coast from accidents caused by passing ships.

Statoil’s corporate website meanwhile says the company is addressing environmental concerns through new technologies for “the safe and sustainable exploration and production of oil and gas in the Far North.”

Statoil said that it helped to establish an ecosystem-based model (Symbioses) that calculates potential impacts of oil spills on zooplankton and fish populations in northern Norway and that results from the ecological research program are being synthesized and used to create a Symbioses project model.

Addressing the possibility of an oil spill in the Arctic, Statoil touts its oil response recovery plans, which it claims is “robust, efficient and well-adapted to local conditions.” The company said it participated in managing a substantial research program, together with eight other oil companies that remains “the world’s largest endeavor ever dedicated to strengthening oil spill response in ice.” Statoil said it is now embarking on a follow-up project for the next five years with industry partners.

However Statoil does admit the unique challenges that an Arctic oil spill would bring which the company says, “are related to extreme cold, ice-covered waters, the darkness of winter, and limited access to clean-up resources.” Statoil adds that prevention is their “ultimate goal.”

Statoil’s comments are characteristic of many oil companies’ views. They address environmental concerns in terms of their successful drilling history and technological breakthroughs. Most claim that offshore drilling technology has increased substantially due to lessons learned from the 2010 Deepwater Horizon disaster in the Gulf of Mexico therefore risks are reduced.

Heininen for his part said that these kinds of claims are propaganda, especially with offshore drilling in icy waters. “We don’t know the circumstances there,” he said. “Icy waters are in the Arctic, even in summer, while winter has around 200 days of darkness with a harsh climate and more icy water and storms. Oil companies don’t have the technology to deal with these kind of conditions if there was a major accident.”

The EIA agrees, stating that adequacy of existing technology to manage offshore oil spills in an Arctic environment is a unique challenge. “Spills among ice floes can be much more difficult to contain and clean up than spills in open waters,” the agency said.

Yet, according to Heininen all of this may be a little premature. He said that oil companies going to the Arctic is an illusion and not happening yet. He makes a valid point since Shell, Statoil and ConocoPhillips recently suspended Arctic exploration amid technical challenges and regulatory uncertainty, at least until 2014 for Shell and 2015 for the others.

Yet, 2014 is just a few months away and 2015 is following close behind. Look for this story to gain momentum and unfold as the New Year approaches and for both sides to wage a PR war of attrition.

Add Comment

By posting your comment, you agree to abide by our Posting rules


© 2013 Energy Tribune

Scroll to top