Date ArticleType
6/22/2016 Member News
Financial Times: Oil Groups Urge US to Leave Door Open for Arctic Drilling

Oil groups urge US to leave door open for Arctic drilling

Exxon believes the Chukchi Sea to the north-west of Alaska offers great resource potential

Leading oil companies have written to the US administration urging it to keep open the prospect that they could drill in the Arctic seas north of Alaska in the next decade.


Oil exploration in the US Arctic has ground to halt as a result of the crude price crash and Royal Dutch Shell’s failure to find significant reserves with a well it drilled in the region last year.


Companies have given up all the US Arctic drilling rights that they had acquired, with the exception of one lease that has been retained by Shell. 

But companies including Shell, ExxonMobil, Chevron and ConocoPhillips have written to the Bureau of Ocean Energy Management, the agency that controls US offshore drilling rights, calling for it to stick to its plan to sell leases off the coast of Alaska between 2020 and 2022.

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The proposed sales have been criticised by environment groups, who say the risks of an oil spill in the region are unacceptable. The companies argue that developing the region’s resources is vital for the US economy.

Their interest in the lease sale programme is an indication that, even though costly Arctic oil does not look commercially viable with crude at today’s prices of less than $50 a barrel, the industry has not given up hopes that it could eventually be developed.

The industry has sharply cut spending on new projects and exploration for additional resources in response to the slump in oil prices, weakening its future production prospects, but still sees the Arctic as an important potential source of future growth.

The consultation period for the BOEM lease sale proposals ended last week, and most large western oil companies submitted opinions that have been published by the US government.


Shell wrote that despite its failures, “we continue to believe offshore Alaska and the broader Arctic have strong exploration potential, and that these areas could ultimately be important sources of energy”. It backed a suggestion from Alaska’s governor that a planned lease sale in the Beaufort Sea off the state’s north-east coast should be brought forward by a year to 2019.


Exxon argued that the US Arctic “possesses enormous untapped oil and gas resources”, with the Chukchi Sea to the north-west of Alaska offering “greater resource potential than any other currently undeveloped energy basin in the US”.


Other companies submitted similar views. Several also complained that the administration had dropped a proposal included in the first draft of the BOEM plan that drilling rights should be offered along the US east coast, from Virginia to Georgia.


Last week, a group of retired US national security and military leaders including William Cohen, secretary of defence under president Bill Clinton, urged the administration to continue with the proposed Arctic lease sales, saying dropping them “would signal retreat” to other countries such as Russia and China, and hurt US influence in the region.


However, Michael Levine of Oceana, an environment group, said it would be better for everyone, including the oil industry, if “difficult and risky” Arctic drilling were delayed.


Although President Barack Obama’s administration supports Arctic drilling, Hillary Clinton, the presumptive Democratic presidential nominee, has argued that it is “not worth the risk”.


Donald Trump, the presumptive Republican nominee, has not talked specifically about the Arctic but has backed increased offshore drilling in US waters.