HIGH RISK, HIGH REWARD
Royal Dutch Shell is back in the Arctic three years after a contractor’s drilling rig ran ashore. In late July, after receiving approval from the U.S. federal
government for an exploratory project in the Chukchi Sea northwest of
Alaska, USA, the oil giant started drilling.
This and other Arctic drilling projects face remote and harsh terrain, regula-tory hurdles and outspoken environmental activists, along with low oil prices
that complicate the business case for such high-cost projects. Yet some organizations have decided to plow through with projects aiming to pump and
process Arctic oil. If successful, these initiatives could forge a path not only for
their own organizations’ long-term growth but also for other oil and gas companies to follow.
The potential rewards are massive: The Arctic holds almost a quarter of
the world’s undiscovered petroleum, according to the U.S. Geological Survey.
Beneath the U.S. area of the Arctic Ocean lie an estimated 27 billion barrels of
recoverable oil and 130 trillion cubic feet ( 3. 7 trillion cubic meters) of natural
gas—more than 30 times the amount the U.S. annually imports from OPEC.
“The Arctic holds what we believe are the last remaining big discoveries of
oil, but they’ll be the hardest to develop—certainly
the costliest and probably the riskiest,” says Foster
Mellen, senior oil and gas analyst, Ernst & Young,
Wilmington, North Carolina, USA. “The question
is: Are those resources big enough to justify the
huge cost and risk?”
Low oil prices have led Chevron, ConocoPhillips
and ExxonMobil to table plans for Arctic drilling
projects. However, Shell, along with the Italian
oil company Eni and Norway’s Statoil, has taken
a long-term view: Right now oil might be plenti-
ful and cheap, but that won’t always be the case.
Shell has already invested more than US$6 billion
in its Arctic drilling initiatives and plans to spend
another US$1 billion. It will likely take a decade
for Shell to turn this year’s exploratory project into
Bear guards wait to take a flight with scientists
working for Shell Oil in Wainwright, Alaska,
USA. The guards protect scientists who might
encounter bears out in the field.
PHO TO BY BONNIE JO MOUN T/THE WASHING TON POST VIA GE TTY IMAGES
Source: U.S. Geological Survey