Preface. Only one exploratory well can be drilled in the short arctic summers, and many more need to be drilled to even find and then explore the size of a potential oil field to see if it is worth extracting. Drilling in the ocean can’t be done because icebergs will mow offshore rigs down (it wouldn’t surprise me if oil companies weren’t working on a dunk and dive oil rig). On land, permafrost tosses pipelines, roads, rail lines and homes areound as it expands and contracts seasonally, costing billions of dollars to fix. In fact, it costs so much to build roads and other oil infrastructure on permafrost that this is one reason not much drilling has taken place in interior Alaska, and as oil declines, becomes even less likely. The EROI of arctic oil and gas is likely to be so very low that the likely ecological damage not worth the risk.
Below are several articles about the difficulty of arctic drilling.
Alice Friedemann www.energyskeptic.com author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer, Barriers to Making Algal Biofuels, and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Derrick Jensen, Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report
November 2020: Arctic National Wildlife Refuge drilling rights aren’t selling because “funding for Arctic drilling is becoming harder and harder to find. Both oil companies and banks have decided they can no longer tolerate the risk of drilling in one of the fastest-warming places on the globe. Buying the leases—which could go for as little as $5 an acre—is the cheap part of the oil exploration process. Every other step—from enlisting consultants to conduct required environmental studies to mounting industrial operations in a remote wilderness without existing infrastructure—is hugely expensive. The break-even price for the oil that companies would extract could be as high as $80 per barrel, according to Rystad Energy, a level the market hasn’t seen since October 2018. Most of today’s likely bidders would need outside financing to actually get anything out of their Arctic leases. But banks are increasingly worried about damage to their public image from backing drilling in the reserve, which 70% of American voters oppose.
The administration’s ability to mount a sale at all—much less formally issue the leases—before Trump leaves office is also in considerable doubt. Because of various requirements and mandatory waiting periods, the earliest auction date is likely Jan. 19, the day before Biden will be inaugurated. That would leave the Interior Department just one day to vet the high bidders and issue the leases, a process that typically takes two months.
Given the current economic environment, the regulatory uncertainty, and the steep public opposition to Arctic drilling, it’s not clear which oil companies would even show up for an auction. Those once viewed as potential bidders for Arctic acreage have slashed spending this year as the coronavirus pandemic eroded crude demand and prices. Even a year ago major companies would have jumped at the chance. Today, not so much.” (Dlouhy 2020 These Days, the Smart Money Is Staying Away From Arctic Drilling. Bloomberg).
July 2020: Funding for drilling projects in the arctic (and oilsands) is getting harder to find. The latest bank to stop lending money for these projects is Deutsche Bank, becoming the latest major bank to reconsider lending money to fossil fuel projects in sensitive areas in addition to 129 other banks representing a third of the world’s banks, with US$47 trillion in assets, to align with the Paris Climate Agreement. In the U.S. Goldman Sachs said in December 2019 that it would decline to finance new Arctic oil exploration and production and new thermal coal mine development or strip mining. Wells Fargo and JPMorgan have also said they would stop financing new oil and gas projects in the Arctic (Paraskova T. 2020. Deutsche Bank Immediately Ends Funding For Oil Sands And Arctic Oil Projects. Oilprice.com).
October 2019 (Bloomberg): Rising temperatures are a particular worry for mining, oil and gas companies. The permafrost area accounts for 15% of Russia’s oil and 80% of its gas operations. It is also home to miners including MMC Norilsk Nickel PJSC, the biggest refined nickel and palladium producer.
Russia has long built structures on piles to improve stability in the permafrost. But as the ground warms it becomes softer, and there are signs problems are increasing. Multiple new craters have also been found in the gas-rich Yamal region, which is a risk to pipelines, and some houses have had to be pulled down in Norilsk, the industrial town where Nornickel operates.
The issue may get much worse. By 2050, warming may affect about a fifth of structures and infrastructure across the permafrost area, costing some $84 billion, according to research published in February by scientists including Dmitry Streletskiy, a professor at George Washington University. That would be equal to about 7.5% of Russia’s gross domestic product. More than half of residential real estate, worth about $53 billion, might be also damaged.
May 2016: After plunking down more than $2.5 billion for drilling rights in U.S. Arctic waters, Royal Dutch Shell, ConocoPhillips and other companies have quietly relinquished claims they once hoped would net the next big oil discovery. The U.S. Arctic is estimated to hold 27 billion barrels of oil [ less than 1 year of global oil consumption] and 132 trillion cubic feet of natural gas, but energy companies have struggled to tap resources buried below icy waters at the top of the globe (Bloomberg).
November 2015: Statoil has abandoned plans to drill in the Arctic Ocean off the northwest coast of Alaska, and is giving up 16 of its leases in the Chukchi Sea as well as abandoning its stake in 50 Chukchi leases operated by ConocoPhillips.
September 2015: After spending $7 billion, Shell announced that after spending $7 billion, it was ending its Arctic effort without ever producing a single drop of oil. Shell cited disappointing results from an exploratory well drilled during the 2015 open water season 80 miles off the Alaska coast.
Offshore Arctic drilling is strongly supported by Alaska elected officials who hope to find an alternative source of oil for the trans-Alaska pipeline. The pipeline provides about 15% of U.S. oil but is operating at only 25% capacity because of declining oil production. The pipeline could turn into a giant Popsicle when the oil flowing through it drops below about 350 thousand barrels a day (it is around 500,000 now, at it’s peak around 2 million barrels a day).
NPC. MARCH 27, 2015. Draft Report Arctic Potential: Realizing the Promise of U.S. Arctic Oil and Gas Resources. National Petroleum Council.
The arctic has about 25% of all the remaining undiscovered resources globally. About 71% of it is expected to be natural gas and 29% liquids.
The majority of the U.S. Arctic potential is undiscovered and offshore.
Resource potential (not RESERVES)
- Offshore: 74%, 389 Billion Barrels of Oil Equivalent( BBOE)
- Onshore: 26%, 135 BBOE.
Reserve estimate: 191 BBOE of reserves (about 6 years of global oil production).
Figure ES-4. Global Arctic Conventional Oil and Gas RESOURCE in BBOE Potential by Country.
The United States is currently benefiting from resurgence in oil production fueled largely by the development of tight oil opportunities in the U.S. Lower 48. Production profiles for these oil opportunities will eventually decline by one million barrels per day by 2040 compared to 2014. If development starts now, the long lead times necessary to bring on new crude oil production from Alaska would coincide with a long-term expected decline of U.S. Lower 48 production. Alaskan opportunities can play an important role in extending U.S. energy security in the decades of the 2030s and 2040s.
The longer time frame required for U.S. Arctic projects is the result of remoteness, long supply chains, short exploration seasons due to ice, regulatory complexity, and potential for litigation.
The time frame for developing any significant offshore opportunity would likely be between 10 to 30+ years.
Myers, S.L., et al. September 8, 2015. Frozen dreams of energy in a warming arctic. New York Times.
“From an economic point of view, I’m not sure going offshore Arctic is very rational,” said Patrick Pouyanné, chief executive and president of Total, the French oil company, which once also planned to drill off Alaska’s northern coast.
“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. Two years ago, his company gave up on a field projected to contain 100 million barrels of oil in the Beaufort Sea — drilled from a man-made island and connected by an eight-mile pipeline to Prudhoe Bay, Alaska — in order to invest more in Texas shale fields. “One-hundred-million-barrel-type discoveries will not be economical in a $100-a-barrel oil environment, and they certainly won’t be economical today,” Mr. Sheffield said.
Even optimistic projections suggest the Arctic might not prove to be as transformative as once imagined. According to Rystad Energy, a global consultancy based in Norway, production from offshore fields in or near the Arctic could double between 2015 and 2025 to 1.4 million barrels a day, which would still be less than 2 percent of current global production. “When people say the Arctic is the next frontier and there is great resource potential, of course there is the risk that it is hype,” said Jon Marsh Duesund, a Rystad senior project manager.
DRILLING IN THE ARCTIC
also see “Professor Tad Patzek on Oil in the Arctic“
The extent of exploration in the Arctic will be greater and the total time required will be longer than in other areas such as the U.S. Gulf of Mexico. This is because Arctic resources are expected to be larger, but less dense and spread over broader areas than in the Gulf of Mexico, and hence require more exploratory wells to gain sufficient definition of the resource to proceed to development. Also, the resource uncertainty in frontier areas such as the Alaska OCS means that subsurface knowledge gained from each well has a great impact on future drilling decisions, compelling serial rather than concurrent exploration drilling, as the results from each well affect decisions on where and how the next should be drilled. Given the severe limitations on the length of the useful annual exploration season, the greater time required for Arctic exploration programs, and the extremely high costs of drilling in remote, icy Arctic conditions, the current 10-year lease term is inadequate to support developing Alaska’s OCS potential.
The key characteristic that distinguishes the Arctic from other oil and gas production areas is the presence of ice. The ice environment varies substantially throughout the Arctic depending on the season and the location.
There are three key physical characteristics of offshore Arctic environments that play a large role in determining the technologies that are required and the degree of complexity of operations. The dominant physical characteristic is ice type and abundance, but water depth and length of open water season also play key roles in differentiating one Arctic location from another in terms of the technology needed and the economic prospects for development.
Although summer ice coverage has decreased, winter ice coverage remains robust. Hence, ice interactions will continue to be the dominant consideration for design of offshore Arctic oil and gas facilities. Challenges include:
- Landfast ice, which can extend from the shoreline out to a depth of about 15 to 20 meters. Landfast ice freezes fast to the shoreline and is relatively stable throughout the winter until the summer break-up occurs. With thicknesses approaching 2 meters, it can provide a stable platform for drilling exploration wells, transporting materials and equipment, or supporting equipment to lay pipelines to shore for shallow water developments.
- Beyond the edge of the landfast ice zone is floating pack ice of varying concentrations, which, depending on the season, might range from sparse coverage near the edge to complete coverage further into the pack.
- Mobile pack ice mass consists of sea ice of varying age and thickness. Depending on location, there may also be inclusions of icebergs or drifting fragments of thick, multi-year shelf ice known as ice islands. The new ice that forms over the open water each winter is called first-year ice. It typically reaches a thickness of 1.5 to 2 meters over the winter season. Wind forces compress and break the ice sheet, forming thickened ridges and rubble fields. When these thickened areas refreeze, they can become the dominant features that impede icebreaker transit and exert large forces on stationary platforms. Second-year ice is thickened ice that results from refreezing of surviving first-year ice from the previous season. Similarly, multi-year ice is built up from multiple freeze cycles of previous years of second-, third-, etc.-year ice. Multi-year ice can range in thickness from approximately 3 meters to more than 6 meters.
- Icebergs are large pieces of freshwater ice that break off from glaciers and drift with sea currents. Icebergs are nearly nonexistent in the U.S. Arctic due to the lack of large glaciers terminating in the nearby ocean. While relatively rare, the U.S. Arctic does contain ice island features, which are thick tabular masses of ice that break off from Canadian ice shelves and drift with the pack.
Open Water Season
In addition to ice conditions and water depth, the length of the open water season—the time without ice coverage—has a significant impact on the types of technologies that can be used for exploration and development. The length of the open water season can vary considerably from year to year. Over most of the U.S. Chukchi Sea lease area, the average open water season is about 3 to 4 months long, but has been as short as 1 to 2 months. Mid-season incursions of pack ice from the north can occur, potentially interrupting operations. In the correspondingly shallow shelf areas of the U.S. Beaufort Sea, the open water season is typically 1 to 1.5 months shorter than in the Chukchi, and can also be interrupted by pack ice intrusions. Access into the Beaufort Sea at the start of the open water season may be impeded by high ice concentrations at Point Barrow, restricting the usable operating window in some years.
If the open water season is 3 months or more, it may be possible to complete the drilling of an exploration well in a single season using conventional technology that would be used in any open water setting. Shorter open-water seasons or deeper reservoirs may require multiple seasons to complete a single well, resulting in much higher costs for exploratory drilling. Likewise, development technology requirements become more challenging and costs increase with decreasing open water season. For example, 3 months may provide sufficient time for installation of platforms and pipelines, while shorter open water periods may necessitate special measures for platform installation and pipeline construction.
On either side of the open water season, there are periods of summer breakup/melting and fall-early winter freeze-up where some ice may be present at a drilling location. These periods are often referred to as the “shoulder” seasons, because ice coverage is reduced and the ice is either receding or newly forming. Past Arctic exploration drilling programs have successfully extended operations into the shoulder seasons by using ice management to break or guide away approaching ice that might otherwise interfere with the rig’s ability to stay in place over the well (“station-keeping”).
Operating in the shoulder season depends on the capability of the drilling rig and ice management vessels to safely contend with ice. In previous Canadian Beaufort Sea drilling programs using the Kulluk, the summer shoulder season could begin as early as late June or early July, and the winter shoulder season could extend into November or even early December. Beyond about mid-December, the ice cover becomes essentially continuous and thickness exceeds 0.7 meter. Extending the drilling season beyond mid-December would require robust station-keeping and ice management capability.
The Arctic is home to distinct indigenous peoples and provides habitat for large numbers of birds, mammals, and fishes. While some areas of the Arctic, such as the central North Slope of Alaska around Prudhoe Bay, have seen decades of economic activity, much of the region remains largely unaffected by human presence. Today, there is increasing interest in the Arctic for tourist potential, and reductions in summer ice provide an increasing opportunity for marine traffic. At the same time, there is concern about the future of the culture of the Arctic peoples and the environment in the face of changing climate and increased human activity.
The Arctic can be defined as areas north of the Arctic Circle. The United States, Canada, Russia, Kingdom of Denmark (Greenland), and Norway all have coastlines within this region, and these countries possess the majority of the resource potential.
Russia is moving forward with increased Arctic economic development during this time of change. Russia is drilling new exploration wells in the Kara and Pechora Seas and is expanding its naval and transportation fleet.
China does not have Arctic territory, but is investing millions of dollars in Arctic research, infrastructure, and natural resource development.
The United States has large offshore oil potential, similar to Russia and larger than Canada and Norway. Facilitating exploration in the U.S. Arctic would enhance national, economic, and energy security.
The cycle of leasing, exploration, appraisal, development, and production takes longer in the Arctic than in other offshore regions. For instance, Northstar, the only U.S. offshore OCS Arctic project, took 22 years from lease sale to start of production, while recent Gulf of Mexico deepwater projects such as Mars and Atlantis took 11 and 12 years respectively.
With a sustained level of leasing and exploration drilling activity over the next 15 years, offshore Alaska could yield material new production by the mid-2030s and sustain this level of production through mid-century and beyond.
Driven by onshore tight oil production, total U.S. crude oil production increased from 5 million barrels per day in 2008 to 8.5 million barrels per day in 2014, and is projected to increase to a maximum of 9.6 million barrels per day in 2019.8 Crude oil imports are expected to decline from 9.8 million barrels per day in 2008 to a minimum of 5.8 million barrels per day in 2019.
But after 2019, U.S. crude oil production is expected to decline to about 7.5 million barrels per day and imports rise to 7.7 million barrels per day by 2040. U.S. domestic crude oil production is 57% of domestic demand in 2014, but declines to 49% in 2040, reversing the improvements in the economy and energy security from the recent production increase.
The EIA includes only minimal future Alaska OCS activity and assumes decline of Alaskan fields from about 0.5 million barrels per day in 2014 to under 0.3 million barrels per day in 2040. Such a decline would mean that the operational viability of the Trans-Alaska Pipeline System (TAPS) could be challenged, potentially resulting in the loss of an additional 0.3 million barrels per day of oil production.
Water depth within the world’s prospective Arctic oil and gas basins varies from zero to more than a thousand meters. As mentioned previously, most of the U.S. Arctic offshore oil and gas potential lies in water depths of less than 100 meters. The Russian Arctic shelf is broad and shallow, with a large fraction of the area lying in water depths less than 100 meters. Water depths offshore Arctic Canada and Greenland, on the other hand, fall off to more than 100 meters closer to shore. Water depth predominantly impacts the type of drilling and production platforms that can be used and whether offshore wellheads and pipelines require burial to protect them from being damaged by moving ice keels that extend to the seafloor. Developments in ice-prone water depths less than about 100 meters are amenable to well-established technology of structures resting on the seafloor (“bottom-founded”). Beyond about 100 meters, a technology transition from bottom-founded to floating platforms may be required because the overturning forces of the floating ice become too large for practically sized bottom-founded structures. Unlike for temperate waters, where floating drilling facilities are routinely used in thousands of meters of water, suitable technology to allow year-round floating drilling in Arctic pack ice will require additional research and development before commercial use.
Although south of the Arctic Circle, Russia’s Sakhalin Island located north of Japan has been home to several developments in Arctic-like ice conditions over the past 20 years. The Sakhalin developments use a combination of offshore drilling platforms and extended-reach wells from onshore drill pads to reach the offshore reserves. The offshore platforms are among the largest ice-resistant concrete platforms ever constructed. Extended-reach wells drilled from shore out to a distance of 13 kilometers have set multiple world records for horizontal reach. The Sakhalin offshore platforms operate continuously through the winter ice conditions where they must resist forces from ice ridge features more than 30 meters in thickness. The produced oil flows back to onshore processing facilities before being carried via pipeline to export terminals. In the case of Sakhalin 1, tankers are loaded year-round at the Dekastri Terminal and are escorted by icebreakers when ice is present.
Exploration can be carried out in waters with a short ice-free season using floating drilling rigs in waters deeper than about 20 meters, but development and production generally requires year-round operation to be economic, which means using facilities that rest on the seafloor and are resistant to ice forces in ice-prone areas.
Technical feasibility is not the only consideration for successful development of oil and gas resources. Ultimately, an opportunity must be both technically and economically feasible to warrant pursuit. For development to progress, a resource opportunity of sufficient size and quality of producible oil and gas must be found. Thus, the ability to explore is the first critical step in a successful development process. Arctic exploration and development is more costly than in other areas due to remoteness, lack of infrastructure, challenging climate, and short operating seasons. Finding large, high-quality resources will be key to economically viable Arctic development.
Availability of existing infrastructure to enable development and production increases the attractiveness of an opportunity. Lack of existing infrastructure increases cost and thus the economic burden on a potential development
The Arctic is characterized by its climate, remoteness, sparse population, and long distance between population centers. This has resulted in limited infrastructure development including ports, airfields, roads, rail, communication networks, and fuel and electricity delivery systems compared with other regions. To promote prudent development, additional capacity is needed. There are many synergies between the types of infrastructure that would facilitate Arctic oil and gas exploration and development and the infrastructure needs of local communities, the state of Alaska, and elements of the U.S. Armed Forces such as the Coast Guard and Navy. Investments by any party in new or upgraded airfields, ports, roads, navigational aids, satellites, radars, and communication facilities could confer wider benefits. The Coast Guard and Navy, which play key roles in the areas of safety, search and rescue, and national defense, are subject to many of the same resupply and support requirements in the Arctic as the oil and gas industry.
Local, state, and federal government agencies should coordinate infrastructure planning by carrying out, where possible, joint scenario planning to identify the intersection of mutual needs such as airfields, ports, roads, and communications to identify opportunities for investment synergies. Planning needs and considerations should include those from the oil and gas industry, Navy, Coast Guard, and local stakeholders, and include options to extend the life of the TAPS pipeline.
Undiscovered potential volumes are based on USGS 2008, Circum-Arctic Resource Appraisal. Discovered potential, reserves, and production values are provided by IHS and are approximate as of the end of 2013. 2 “Liquids” refers to crude oil and natural gas liquids. 3 IHS, International E&P Database, September 3, 2014, http://www.ihs.com/products/oil-gas/epdata/sets/international.aspx. 4 Ibid.
Billion barrels of oil, or oil equivalent for gas; 6,000 cubic feet of gas is equivalent to 1 barrel of oil. 6 “Conventional oil” refers to oil found in liquid form flowing naturally or capable of being pumped without further processing or dilution.
[Another note: But once oil shortages strike the gloves will come off, and arctic exploitation will be the least of things to worry about as America is likely to go to war with any nation that refuses to sell us oil, such as Venezuela, Ecuador, Colombia, the Middle East, and so on (Friedrichs).