Obama’s Ambitious FRAC/ARCTIC Drilling Strategy Has Been Shot Full of Holes By Saudis

[SEE:  White House defends Arctic drilling plan ; Shell gets final permit for Arctic ]

Does Arctic Drilling Have A Future With Sub $50 Oil? 

OILPRICE

By
Posted on Mon, 24 August 2015 22:23 | 0

Italian oil group ENI is expected to begin production from the Goliat Field off Norway in a few short weeks. The project, which has cost $5.6 billion, is expected to produce 34 million barrels of oil per year by the second year of production.

Yet ENI seems to be bucking the global trend, as would-be Arctic drillers in other parts of the region hand back leases or allow them to expire, citing high risks and high costs as major contributing factors. Successful environmental campaigns as well as an increased global awareness – and political will – to address climate change have also been influential.

All this against a backdrop of global oil prices below $50 a barrel and an outlook of continued oil market volatility.

With Arctic exploration and production being so expensive, the risks so great, and the current market conditions relatively unfavorable, one might ask why Shell, ENI, and others would continue.

Related: Low Oil Prices: Assessing The Damage So Far In 2015

The main reason is resource potential. The Arctic holds the last, great, untapped oil and gas reserves. The U.S. Geological Survey in 2008 estimated that the Arctic contains 22 percent of the world’s undiscovered hydrocarbon resources, totaling 90 billion barrels of oil, 1,670 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids.

But those resrources come at a significant cost. One estimate put project costs in the Alaskan Arctic at 50 – 100 percent greater than an equivalent project in Texas.

Shell has discovered this first hand. The company has sunk $6 billion into its arctic ambitions, and experienced several high-profile setbacks, including the abandonment of its drilling campaign in the Beaufort Sea after its oil rig ran aground in 2012.

Related: Oil Price Collapse Triggers Currency Crisis In Emerging Markets

For many opponents, the environmental cost is simply too high. Environmentalists such as Greenpeace and the National Resource Defense Council, among others, argue that there is no safe way to develop the Arctic region’s oil and gas potential.

U.S. Democratic presidential hopefuls agree. Hillary Clinton, Martin O’Malley and independent Bernie Sanders have all opposed drilling in the Arctic. Of course, campaign promises are an imperfect indicator of policy action in office. But companies would be wise to take note.

Moreover, with momentum building for this year’s COP 21 climate talks in Paris – and a genuine possibility of reaching global accord on climate action – there are many arguments to support a cutback of such high-risk hydrocarbons exploration.

In a letter in Nature magazine last January, scientists demonstrated that development of oil and gas resources in the Arctic would be “incommensurate” with efforts to limit average global warming to 2C.

Low oil prices and, perhaps more importantly, oil market volatility, is another major factor. Even the great arctic oil explorer Statoil has begun to feel the pinch. Norway’s national oil company has announced it will not be drilling any wells in the far northern Barents Sea this year. The company led the world’s most active arctic exploration campaign in 2014.

Related: This JV Could Trigger A Shale Boom In An Unexpected Venue

At one time ENI held 89 offshore leases in the Beaufort and Chukchi Seas but has allowed many to expire without drilling.

In Greenland, several companies, including Statoil and Engie (formerly GDF Suez) have handed back their licenses. High costs, lack of infrastructure, and climate have made the area particularly difficult for drilling. That British company Cairn Energy had no commercial success after a two-year campaign no doubt influenced others’ decision making.

Meanwhile, back in Norway, Arctic drilling has its own critics. Though not on the scale of Greenpeace’s “kayaktivists”, both Christian Democrats and the Liberal Party have opposed the government’s efforts to redefine the ice edge – which has been gradually receding – and allow companies to develop previously unexplored areas of the Arctic.

Norway is optimistic that companies taking a long term view on oil prices and supply outlook will still be interested in its latest bidding round, which offers acreage in the Barents Sea.

In the meantime, Shell is not expected to begin commercial production until 2030, and any new contracts awarded under Norway’s bid round would likely have a similarly long horizon. Much could change by then.

By Alexis Arthur Of Oilprice.com

 

About the author

Contributor

Alexis Arthur

Alexis Arthur is energy policy associate at the Institute of the Americas, a think tank on Western Hemisphere Affairs based in La Jolla, Calif.

 

 

FSB (Russian Intelligence) Stops Sale of Russian Oil-Drilling Co. To Texas Outfit

[Bloomberg erased the following report from American sites immediately after posting it.  Fortunately for us (us early worm-getting birds), it had already been posted by Forbes in Russia.  The Russian FSB stopped the sale of Eurasia Drilling Co., which would have led to Schlumberger owning the whole drilling company within a short time.]

Bloomberg reported claims FSB transaction Schlumberger and Eurasia Drilling

forbes .RU  [RUSSIAN TRANSLATION]
Federal Security Service (FSB) of Russia hinders the biggest deal in the Russian drilling business – the sale of 45,65% Eurasia Drilling Co. (EDC) Schlumberger oilfield services company for $ 1.7 billion, said Tuesday the agency Bloomberg , citing two knowledgeable sources.

According to the source, the FSB is concerned that the transaction western company to get too big impact on the Russian market of oilfield services. A final decision has not been made, the source said. The deal must be approved by a government commission to monitor foreign investment, which considers the transaction in the strategic sectors of the Russian economy. The commission consists of 21 people, among them – the head of the FSB, Alexander Bortnikov, Defense Minister Sergei Shoigu, and Deputy Prime Minister Dmitry Rogozin.

The press service of the FSB declined to provide you with comments. Official representatives of Schlumberger and EDC declined to comment on the process of approval of the transaction with the Russian regulators. The representative of the Federal Antimonopoly Service (FAS) of Russia also declined to comment.

The fact that the deal EDC and Schlumberger have influential opponents, said in July, sources Forbes, familiar with the negotiations. One source said that it was the “siloviki”, two – it’s “structures act in the interests of” Rosneft “.” “Rosneft” and she negotiated the purchase of EDC, but they ended without results, said two people close to the state-owned companies. A source in the “Rosneft” has denied involvement in the company to a delay in the approval of the transaction.

Vice-president of Eurasia Drilling Investor Tom O’Gallaher August 20, he said the company does not know what are the fears of Russian regulators. “This is more a political issue, not the practical difficulties with which we could overcome Schlumberger” – quoted him as saying Bloomberg.

The world’s largest oilfield services company Schlumberger in January 2015 announced its intention to acquire 45.65% stake in EDC, the largest player in the Russian market of oilfield services and drilling services. The transaction amount will be $ 1.7 billion. At the same time Schlumberger reserves the right to subsequently consolidate 100% EDC.

The transaction is scheduled to close in the first quarter of 2015, but its approval was delayed. FAS has put forward a number of conditions to the transaction, in particular, the mandatory sale of shares in EDC Russian investors in the case of new sanctions. The issue of trade was also submitted to the Government Commission on Monitoring Foreign Investment, which has not yet made a decision.

US Stocks Plummet 1000 Points After China Drop—Today Another 1000 Point Drop Expected

[Yesterday, the precious Dow dropped 1000 points when it opened, after the Chinese market dropped by 7%.  Look for a similar drop when it opens again this morning, after China falls another 7 (SEE: Dow drops 1000 points, US stocks plummet at open ).]

China Stocks Plummet Another 7 Percent Amid ‘Mood of Panic’ 

nbc-logo

The CSI300 index of the largest listed companies in Shanghai and Shenzhen dropped 7.1 percent, while the Shanghai Composite Index collapsed 7.6 percent to close below the psychologically significant 3,000-point level.

Underscoring the panic gripping the retail investors who dominate China’s stock markets, all index futures contracts fell by the maximum 10 percent daily limit, pointing to expectations of even deeper losses.

After the turmoil in China rocked world equity and commodity markets on Monday, policymakers elsewhere in Asia sought to soothe fears about the broader impact on the global economy.

“I think it’s important that people don’t hyperventilate about these type of things,” said Australian Prime Minister Tony Abbott, whose country is heavily exposed to China, the biggest consumer of its commodity exports. “It is not unusual to see stock market corrections. It is not unusual to see bubbles burst in particular markets and for there to be some flow-on effect in other stock markets, but the fundamentals are sound.”

Japanese Finance Minister Taro Aso also said Chinese stocks, which had more than doubled in the six months to May, had been a bubble that was now bursting.

“There’s also suspicion on whether China’s official GDP figures reflect the real state of the economy,” he told a news conference after a cabinet meeting in Tokyo.

After a year of heady gains, Chinese markets have been buffeted by increasing signs that economic growth is faltering.