Econintersect: French oil giant Total SA (NYSE:TOT) has taken the position that off-shore oil drilling in the Arctic should not be ubdertaken because the environmental risks are too high. In a statement to the Financial Times, Christophe de Margerie, Total’s chief executive, said that natural gas drilling was much more feasible and exploration should continue. Natural gas spills pose less risk than do oil spills, according to de Margerie.Last week, Shell (NYSE:RDS.A) and (NYSE:RDS.B) had to pull out an off-shore drilling operation after seven years and more than $4 billion of expense. The reason for the Shell postponement of drilling was two-fold: safety equipment on the rig had been damaged during testing and there was approaching sea ice.
Shell is one of several oil majors planning on off-shore oil drilling in the Arctic, but Total is not one of them. Total plans to do natural gas drilling only.
The hydrocarbon reserves of the arctic are estimated to be significant. From The Russian Geographic Society:
While most offshore areas have not been surveyed for resources, the extensive continental shelves in the region are believed to hold huge reserves of oil and gas. In 2008 the U.S. Geological Survey (USGS) completed the most comprehensive assessment of potential hydrocarbon reserves to date, using computer modeling to evaluate 25 Arctic geological provinces. From this, the USGS estimates that the “undiscovered, technically recoverable” stores of petroleum include 90 billion barrels of oil, 1,670 trillion cubic feet of natural gas, and 44 billion barrels of natural-gas liquids. These figures suggest the Arctic may hold about 22 percent of the undiscovered conventional hydrocarbon reserves untapped worldwide.
Roughly 85 percent of these potential reserves are thought to occur offshore at depths of 450 meters or less. The majority of untapped natural gas probably lies within Russian territory, while most of the oil is located offshore of Alaska. The assessment indicates that more than 70 percent of the petroleum stores are concentrated in only five geological provinces: Alaska; the Amerasian Basin (underlying the Arctic Ocean); and the East Greenland Rift, East Barents, and West Greenland–East Canada basins.
Ricardo Conejo recently reviewed territorial claims in the Arctic at GEI Analysis and posted the following map:
- Total warns against oil drilling in the Arctic (Guy Chazan, Financial Times, CNN, 26 September 2012)
- Shell Delays Arctic Oil Drilling Until 2013 (Clifford Krauss, The New York Times, 17 September 2012)
- The Arctic Oil & Gas (Russian Geographic Society)
- Dealing With Territorial Claims in a Thawing Arctic (Ricardo Cornejo, GEI Analysis, 12 August 2012)