Belying the initial euphoria, the oil exploration in Arctic region is turning difficult. The latest to exit Alaskan oil exploration is Norwegian oil company, Statoil, which announced that the projects are not feasible and it is abandoning the exploration plans in Alaska. It is certainly a body blow to oil exploration in the Arctic region as a whole. Another big oil company, Royal Dutch Shell, exited the Arctic exploration in September.
According to geologists at the US Geographical Survey, Arctic contains 13 percent of the worlds undiscovered oil and 30 percent of global gas reserves.
Statoil said it would withdraw from 16 exploration leases in the Chukchi Sea besides retracting from the stake in 50 leases operated by ConocoPhillips, reports the Financial Times.
"Since 2008 we have worked to progress our options in Alaska. Solid work has been carried out but in the current outlook we could not support continued efforts to mature these opportunities, said Tim Dodson, head of exploration at Statoil. The Alaskan leases are not competitive, he added.
Shell ended its US$7 billion (AU$9.73 billion) exploration effort in September in the Chukchi Sea. It was cheered by environmental campaigners as a landmark decision.
According to analysts, at the core of the Arctic retreat is the falling oil price. Faced with pressure, oil majors are slashing costs at the exploration front. Axe naturally falls on Arctic projects and companies prefer quitting projects in Arctic region spread in the US, Canada, Greenland, Norway and Russia.
Statoil was granted leases in Alaska in 2008 and the period will expire in 2020. Statoil had also pulled back from the Norwegian Arctic, where it did not drill wells in the Barents Sea. It also delayed the development of its Johan Castberg field, citing lack of infrastructure in the region.
The Barents Sea of Norway is a significant part of the Arctic Circle bordering Russia, where oil companies are investing heavily in exploration. Several wells have been planned by the Norwegian government as the region is opening up for exploration after many decades.
Obama administration blamed
Meanwhile, Alaskan Senator Lisa Murkowski flayed the Obama administration for Statoils decision to exit Arctic drilling.
Low oil prices may have contributed to Statoils decision, but the real project killer was this administrations refusal to grant lease extensions; its imposition of a complicated, drawn-out, and ever-changing regulatory process; and its cancellation of future lease sales that have stifled energy production in Alaska, Murkowski said in a statement.
The US government sold the lease rights in the Chukchi and Beaufort Seas north of Alaska in 2008. For the leased blocks, the oil industry paid US$2.6 billion (AU$3.61 billion) after a record 667 bids on 488 blocks. That time, it was hailed as the sign of new era in oil and gas drilling at Arctic by the federal government, state of Alaska, and the industry.
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