[Sixstrings]

Demonstrators in Seattle last month marched in protest of an oil rig leased by Shell that is bound for the Arctic Ocean

U.S. Will Allow Drilling for Oil in Arctic Ocean

WASHINGTON — The Obama administration on Monday gave conditional approval to allow Shell to start drilling for oil off the Alaskan coast this summer, a major victory for the petroleum industry and a devastating blow to environmentalists.

The decision adds a complex new chapter to the legacy of President Obama, who has pursued the most ambitious environmental agenda of any president but has sought to balance those moves by opening up untouched federal waters to new oil and gas drilling.

Shell has sought for years to drill in the icy waters of the Chukchi Sea. Federal scientists believe the region could hold up to 15 billion barrels of oil.

The Interior Department decision angered environmentalists who for years have demanded that the administration reject offshore Arctic drilling proposals. They fear that a drilling accident in the treacherous Arctic Ocean waters could have far more devastating consequences than the deadly Gulf of Mexico spill of 2010, when the Deepwater Horizon rig explosion killed 11 men and sent millions of barrels of oil spewing into the water.

Both industry and environmental groups say that the Chukchi Sea is one of the most dangerous places in the world to drill. The area is extremely remote, with no roads connecting to major cities or deepwater ports within hundreds of miles, making it difficult for cleanup and rescue workers to reach in case of an accident.

The closest Coast Guard station with equipment for responding to a spill is over 1,000 miles away. The weather is extreme, with major storms, icy waters and waves up to 50 feet high. The sea is also a major migration route and feeding area for marine mammals, including bowhead whales and walruses.

The move came just four months after the Obama administration opened up a portion of the Atlantic Coast to new offshore drilling.
http://www.nytimes.com/2015/05/12/us/white-house-gives-conditional-approval-for-shell-to-drill-in-arctic.html?_r=1

[ROCKMAN]

Hmm...no comments yet. I guess the greenies are just to embarrassed to acknowledge the latest action of "the greenest POTUS in our history". I imagine if it were an R POTUS we would see dozens of hateful comments about the drill permit.

[Sixstrings]

Hmm...no comments yet. I guess the greenies are just to embarrassed to acknowledge the latest action of "the greenest POTUS in our history". I imagine if it were an R POTUS we would see dozens of hateful comments about the drill permit.

Obama admin is on a clean sweep lately -- TPP, arctic drilling. Drill baby drill.

Maybe Alaska can take a cue from Wyoming and just make it illegal to take any pictures of environmental things, that solves the problem! Combine that with a ban on even saying the words "climate change" and this whole issue is over with.

As for the issue itself --

I'm generally for drilling (NEVER in my state though! We don't want offshore rigs close enough to do damage), but okay for other states if they want it, with all the right eco impact studies and then regulation and precautions taken, but I don't really sense even that from the Obama admin.

An issue raised in the above article is that there aren't enough coast guard up there in the arctic to handle it if there was a spill.

I wonder if the Canadians are more prepared for arctic drilling. Maybe we could work something out with them and pool resources.

[ROCKMAN]

I'm not sure why they toss the Coasties into the discussion. In the Gulf of Mexico the primary job of the Coasties is to sit back and watch the oil patch deal with spills. The oil patch funds all the reserve equipment, manpower and subcontractors to deal with problem. That's the critical question in the Arctic: who are the "first responders" and what are their capabilities? It isn't the Coat Guard in the GOM so it wouldn't be them in the Arctic either.

[Timo]

Obama just lost most of the respect i ever had for him. He does have some incredible speaking abilities, and has accomplished some very positive things for this country, but on the whole, i think the long-term negatives far outweigh the short-term positives. Now, even the short-term positives are beconing negatives. Arctic drilling, case in point.

[KrellEnergySource]

As shown in the New York Times article in the original post:

"Both industry and environmental groups say that the Chukchi Sea is one of the most dangerous places in the world to drill. The area is extremely remote, with no roads connecting to major cities or deepwater ports within hundreds of miles, making it difficult for cleanup and rescue workers to reach in case of an accident.

The closest Coast Guard station with equipment for responding to a spill is over 1,000 miles away. The weather is extreme, with major storms, icy waters and waves up to 50 feet high. The sea is also a major migration route and feeding area for marine mammals, including bowhead whales and walruses."

This is my go-to debate point when talking to anyone that feels we don't need to be concerned about Peak Oil because there is plenty of oil, or peak worldwide extraction is several lifetimes down the road, or "oil sands" and shale will meet our needs. If we're so awash in the stuff, why don't we just take it out of the easy places (and as fast as we need....).

Brian
Brian

[ROCKMAN]

pstarr - Here's more then you want to know about the process. No deep water ports required to produce the oil. Some years ago when I was drilling DW horizontal wells for ExxonMobil off the African coast of Equatorial Guinea it was processed by an FSPO and the oil was tinkered directly to the US and EU...it never set foot in Africa.

Oil and gas transport holding back Gulf of Mexico deepwater

Pipelines and shuttle tankers linked to floating production, storage, and offloading (FPSO) vessels are the choices in moving offshore oil and gas to shore. Worldwide, operators select the transport system that best fits their development scheme and economics. In the Gulf of Mexico, operators are limited to pipelines and the field economics imposed by their limitations. FPSO acceptance remains under review by the US Department of the Interior's Minerals Management Service (MMS) and a decision is expected in early 2001.

Pipelines are the most common and accepted method of oil and gas transportation. A pipeline infrastructure, such as exists in the Gulf of Mexico, allows economic tie-in of oil and gas production, especially where associated gas exists in volumes that cannot be injected or flared. With greater water depths and distance to shore, or at least the nearest tie-in point on the shelf or slope, transport economics become a critical element in development decision-making. The cost of installing pipelines in the deepwater Gulf of Mexico becomes astronomically high in depths beyond 3,000-4,000 ft. Factors in the cost profile include the following:

•Pipe wall becomes very robust, taxing both pipe mills and the size of a lay spread, and sometimes limiting the size of pipe.

•Second lines to route gas separately from oil, or to create pigging loops, change the economics and reduce development choices.

•Seabed topography and relief, along with soil support and consistency, impose limitations on pipeline routing choices or make a route much longer or in greater need of support spans and anchoring devices than might be otherwise.

•The chemistry of production and flow conditions determines the degree and type of wellhead protection and temperature protection (active or passive) along the pipeline.

All of these measures drive costs of transport, and indirectly determine or limit the type of development system, and in deepwater they escalate transport costs by great orders of magnitude.

Decision by 2001 - Last year, the MMS issued an Environmental Impact Statement (EIS) on the use of FPSOs in the Gulf of Mexico, funded 100% by the large industry consortium, DeepStar. The MMS plans to approve a draft of the EIS this month and release it to the public. Through July and August, the MMS will hold public hearings on the topic and release the final EIS in November. A record of decision would then be submitted in January of next year. There are three alternatives considered in the EIS:

•Approval of the general concept using FPSOs in deepwater areas of the Central and Western Gulf of Mexico

•Approval of the general concept with geographic and operational restrictions or conditions

•The general concept is neither approved nor disapproved.

If the concept is approved, companies could begin submitting applications for use by the first quarter of next year. Each application will undergo a site-specific environmental assessment, which the MMS said would take about six months. This places an FPSO (if all goes to plan) is US Gulf waters by the end of 2001 at the earliest, but more than likely, such a vessel would require 1-2 years to convert or build, unless a producer anticipates the MMS decision and moves ahead.

Independent analysis - Some oil and gas producers are preparing for any number of options in the decision by the MMS. For example, BP Amoco has formed a deepwater oil and gas transportation team. The mission of the group is "to deliver options to bring to shore the company's significant oil and gas reserves in the southern Mississippi Canyon, the southern Atwater Valley, and the Green Canyon areas of the Gulf" on a 100% BP Amoco funded basis.

BP Amoco said the team is working along two tracks: one looking at oil transportation issues, the other looking at gas pipeline options. "We expect to develop a set of recommendations and begin execution of the project in the next year," explained David Welch, BP Amoco's President of Gulf of Mexico Deepwater Development.

"Our expectation is that the first segments of the system will be available for use as early as 2003, when the first of the fields under development is ready to begin production," Welch said. "We estimate the cost of providing the needed infrastructure to be in excess of $1 billion."

Furthermore, BP Amoco has awarded contracts valued at $8 million during the first year to Paragon Engineering and Intec Engineering to do preliminary engineering work relating to this project. Paragon will focus on onshore and the continental shelf offshore pipelines and potential booster stations. Intec will concentrate on deepwater infrastructure. The companies also will help BP Amoco review and select routes, equipment, and transportation system components.

Without FPSOs, the Gulf of Mexico deepwater development will remain tied to the pace at which deepwater pipeline infrastructure can be installed. There are clusters of deepwater discoveries, which make economic sense to link with pipelines back to existing infrastructure, but most discoveries are widely spread, such that pipelines linking more than one or two would be prohibitively expensive at this time.

The pipeline problem is central to any leasing or drilling decision by producers in the Gulf of Mexico. Stranded investments in exploratory and confirmation drilling are a luxury only the largest producers can afford. But the larger picture is that producers are wasting a considerable effort and investment in the Gulf of Mexico and elsewhere in the world to gain the knowledge and equipment designed to drill and produce in great water depths, only to be limited by a lack of transport infrastructure. On the other hand, regulators would caution that one environmental accident in deepwater will put all that investment on hold anyway.

Two scenarios - With or without FPSOs, the Gulf of Mexico deepwater will experience a boom. With FPSOs, development will take place earlier on many discoveries, and render some fields commercial that are not developable due to infrastructure access or other transport limitations.

The other scenario, without FPSOs, will bring about another type of boom. Pipeline and pipelay contracting capacity will come at a premium as the significant cost and time required for heavy wall deepwater pipelaying will tax the fleet - and pipe mills. Already, pipeline and construction vessel contractors are gathering in the Gulf of Mexico, knowing that regardless of whether FPSOs are approved or disapproved, they will have a great deal of work laying laterals, connecting lines, field lines, crossovers, and protective materials for all types of lines.

Despite the wide availability of FPSO experience in other areas of the world, the decision over FPSOs in the Gulf is a treacherous one for the MMS. Even though there are valid safety or environmental concerns, refusal to grant FPSOs status to operate or severe limitations on their deployment will undoubtedly hold back development in the Gulf of Mexico. From this, other repercussions will result:

•At a period when oil and gas prices are very high and US imports are continuing to rise, the US is becoming more dependent on the Gulf of Mexico for future production and import relief. Measures that are seen to delay that development could be politically costly, although an accident traceable to poor deicision-making could have the same result.

•Linking development too strongly to the presence of infrastructure or pipeline availability limits exploration (and therefore competition for leases) and development to the largest producers. Smaller producers are squeezed out of an equal opportunity to pursue deepwater leases. Approval of FPSOs opens up bidding, leasing, and drilling to many more producers, who would otherwise have stayed out because of the cost stranding situation.

FPSOs attractive option - FPSOs are not the only floating production scheme, but when storage must be incorporated, the options dwindle fast. Deep draft floating systems, of which spars are the best example, have the most experience outside of FPSOs, but some new designs of semisubmersible units can also incorporate storage in lower modules. However, FPSOs probably are the least costly units and are easier to re-deploy from one field to another.

There is another aspect of FPSOs that should help establish them as a strong ally to producers in development decisions. Like drilling rigs, supply boats, helicopters, consumeable providers, and other mobile assets or services offshore, FPSOs are gradually becoming a commodity. Originally, oil and gas producers purchased converted or newbuilt FPSOs and deployed them on single fields. Thought was given to later re-deployment, but not seriously and the economics did not depend on it. Gradually, the complexity of FPSOs (turrets, mooring, production trains) forced producers to re-visit both the redeployment as well as ownership issues.

In order to make the economics work, and especially when prices for conversions and newbuilt units soared over $200 million, producers had little choice but to program in re-deployment when designing the vessels. Today, FPSOs are generally insensitive to depth, so they are ideal for later use in deepwater. Just as with drilling units, secondary or later redeployment elsewhere allows producers to sell off these costly assets and lease them back. Today, a number of contractors have made a market in FPSO leasing, and most of them remained quite stable despite weak oil price conditions.

Not only are FPSOs growing into a global commodity fleet, but producers are gaining more options on deployment and lease flexibility, all of which will help large and small producers in the Gulf of Mexico pick the right vessel for their needs. Eventually, the vessels that offload the production from moored FPSOs will also become commodities, with common mooring and loading connections, so that they can receive production from any number of units. The number of discoveries in the Gulf of Mexico, and even West Africa, provide some assurance that this will happen.

What is decided in the Gulf of Mexico will not change the course of FPSO economics, just delay what would have taken place anyway. And, pipeline contractors are going to have plenty of work to do anyway, because of the increased number of fields made commercial in deepwater and ultra-deepwater by the FPSO option.

[KaiserJeep]

I think Obama has had it explained to him in exquisite detail exactly what it means to have rare and expensive oil. This has in turn made him quietly gulp down his last meal which was threatening to regurgitate, and approve oil/gas drilling wherever possible and practical.

This has reluctantly earned my respect - it would be an act of insanity to listen to the Climate Change crowd, once you understand that the consequences of running out of affordable oil at the present level of energy technology really are. As I have said all along, up to your waist in warm sea water is better than starving in the cold and dark.

Now I'll say something else: Beginning with Eisenhower, every single POTUS of both major parties has said that we have to free ourselves from imported oil. We now know full well how important that is. I want a POTUS to stand up and say that we should dedicate ourselves to the goal of eliminating our dependencies upon FF's completely and rapidly.

If the US can't do it, nobody can, and the Four Horsemen have free rein:

(These are really Nazgul, a la Tolkien, but you take my point.)

[ROCKMAN]

“Beginning with Eisenhower, every single POTUS of both major parties has said that we have to free ourselves from imported oil”. Let’s try a different angle: other than pitching a populist story to the ignorant masses what POTUS would really have wanted us to stop importing oil? I suppose it depends on how we stop importing oil. A) we produce the same amount domestically or B) decrease our consumption of oil.

Since A is a fantasy that has never been realized even after our recent great surge we can ignore it. So that leaves us with B…either the US had banned all oil imports or they didn’t exist in the first place, Either way the same result: the US economy would have had to deal with 106 BILLION BBL OF LESS OIL. Yes: that’s how much the US has imported since 1970 when the volume began to grow significantly. Using $35/bbl as an inflation adjusted value that’s $3.7 TRILLION the US oil consumers would have not spent with a big chunk of it sent overseas. OTOH that $3.7 trillion of oil that was used to power the US economy for the last 45 years…so how would our GDP have looked over those 5 decades without that imported oil? No so robust IMHO. And would the consumers have really saved that entire $3.7 trillion. IOW would have oil fallen to less than $15/bbl in the mid 80’s had the KSA not dumped a huge volume of oil into the market place that US consumers greedily feasted upon? I think not.

While there have been tense moments of political drama over the status of our foreign oil imports can anyone point out when that has caused significant damage to our country? Some silver linings: we would certainly have better fuel economy of the US rolling fleet. And we would have seen fewer vehicles on the road thanks to the higher unemployment/lower wages the public would have experienced with a drastically reduced GDP. We would have also had fewer jobs created since work requires energy. But maybe we would have expanded the alts faster.

I could go on with a variety of good news/bad news examples. But I’m sure everyone gets my point. So what say our merry group of brothers (and a few sisters): who would have preferred the US to have not imported that 106 billion bbls of oil and who are thankful we did?

Free ourselves of imported oil? As a wise man once said: Be careful what you wish for…you might get it. LOL.

[Alaska_geo]

I'm not sure why they toss the Coasties into the discussion. In the Gulf of Mexico the primary job of the Coasties is to sit back and watch the oil patch deal with spills. The oil patch funds all the reserve equipment, manpower and subcontractors to deal with problem. That's the critical question in the Arctic: who are the "first responders" and what are their capabilities? It isn't the Coat Guard in the GOM so it wouldn't be them in the Arctic either.

Rock I'm surprised you are not better informed on this topic. No indeed, the Coasties don't actually clean up the oil. However, by law the USCG has legal oversight of spills in US waters. The company who's oil is spilled is referred to as the "Responsible Party". Your company spills it, your company pays to clean it up. Not rocket science, really. As BP found out, it can get rather expensive.

In practice, a "Unified Command" is set up, with representatives from the USCG, the Responsible Party, and other state or federal agencies who have some legal stake. The UC is supposed to come up with a clean up plan acceptable to all. However, in case they can't agree the USCG has the tie breaking vote. When the Coasties ain't happy, then nobody's happy! If you work in US waters, that's the way it is. Deal with it.

Regarding Alaska, there is robust spill response capability in the areas of current oil activity (Prudhoe Bay and other N Slope fields, Cook Inlet, and Prince William Sound). There are also mutual aid plans in place. For example if oil were spilled in Cook Inlet, some gear would be redeployed from Prince William Sound and/or the N Slope. Shell has cached a good deal of gear in the arctic to support their plans. A big part of their current effort to get permits is convincing the Feds they have enough capability. Their recent history in this regard obviously hasn't helped their case.

The Coasties are also ramping up their activities in the arctic. Not just because of oil drilling either. With the reduction of sea ice, cruise ships are starting to travel there. The Coasties recognize that one of these days they will be doing a major SAR up there. Or maybe a spill when a cruise ship gets dinged by ice. Hence they have begun to deploy a small contingent to Barrow during the summer. Also sometimes a cutter and aircraft. The problem is, as always, money. Congress has given them the responsibility, but not the funding. They do a pretty good job, considering they do it on a shoestring.

[MD]

Anything to keep that pipeline running above minimum capacity will be approved, until the stay it stops forever.

[ROCKMAN]

"However, by law the USCG has legal oversight of spills in US waters". Yes: as I said...the Coasties sit back and watch the oil patch deal with the mess it caused. "Oversight" = sight = watching. As you point out there are "robust" response plans in place in offshore Alaska. Response plans that will be put into affect by the oil patch if there's a spill. And the Coasties will sit back and watch the oil patch clean up its mess up there just like they do in the GOM. Just like they did in one of my offshore La. fields that had a very small spill when the bottom blew out of a nearly empty storage tank. The Coastie officer in charge of oversight did his job: every day we had a short chat on the phone about the status of the clean up. That was the extent of the Coastie "legal oversight".

[dinopello]

Anyone who is surprised by this obviously never listened to what Obama said during campaigns and in policy papers. All of the above has always been the strategy when it comes to generation/extraction. The main difference between Obama and the drill baby drill crowd is he also wants to tax energy profits, spend on clean energy research while incentivizing the use and regulate to try and make it all safer and cleaner. Tax, Spend, Regulate. That's the part that conservatives don't like. You can argue about the merits but the policy direction has always been very clearly stated.

[Plantagenet]

Anyone who is surprised by this obviously never listened to what Obama said during campaigns and in policy papers.

And, let me add, they never read my posts. I've been pointing out for years that Obama is a serial liar who couldn't be trusted.

The main difference between Obama and the drill baby drill crowd is he also wants to tax energy profits, spend on clean energy research while incentivizing the use and regulate to try and make it all safer and cleaner.

I guess, except Obama actually is the biggest "drill baby drill" president the US has ever seen, and the US energy sector actually was highly taxed, and billions have always been spent on clean energy research before Obama started diverted the federal research funds to line the pockets of his rich cronies at Solyndra etc., and regulators have been working for years to try and make it all safer and cleaner.

And speaking of regulation, let me make one more point here----who's energy department waived the EIA process to allow BP to rush in to drill the Macondo well which promptly blew out and turned the Gulf of Mexico brown? Why----it was Obama who waived the normal EIA process.

And who's EPA waved the normal protections on using carcinogenic chemicals after the oil spill----Why----it was Obama who waved the EPS rules so BP could dump huge amounts of carcinogenic chemicals into the Gulf.

Who allowed the oilcos to drill off the east coast? Who is allowing the oilcos to drill in the Arctic. ----Why its Obama again.

Frankly, I don't understand why people still reflexively defend Obama. Look at his record, folks---its not good.

[ROCKMAN]

plant - I'll defend the POTUS, you bastard. LOL. He's done more to aid the oil patch then the D's in Washington and environmentalists would have ever accepted from an R POTUS. As far as his other efforts on alt development he's fallen far short of what our R politicians have done in Texas.

[dinopello]

Anyone who is surprised by this obviously never listened to what Obama said during campaigns and in policy papers.

And, let me add, they never read my posts. I've been pointing out for years that Obama is a serial liar who couldn't be trusted.

Well, on this issue he has clearly said what he wanted to do (exploit all available energy) and has done pretty much what he said he would do - to the extent he has unilateral control to do so. Anything that requires congressional action of course has not been done.

[PrestonSturges]

Walruses covered in oil will be nasty.

[Alaska_geo]

.......And the Coasties will sit back and watch the oil patch clean up its mess up there just like they do in the GOM. Just like they did in one of my offshore La. fields that had a very small spill when the bottom blew out of a nearly empty storage tank. The Coastie officer in charge of oversight did his job: every day we had a short chat on the phone about the status of the clean up. That was the extent of the Coastie "legal oversight".

You seem a bit upset about it Rock. Not sure why? A very mall spill with negligible environmental consequences got a small oversight from the USCG. Seems like a very appropriate level of response to me. Would you have liked it better if they sent 2 cutters, a Herc, 3 Jayhawks, and 50 Coasties to your platform to get in your face? I rather doubt it.

It is worth noting that much of the current level of oversight and required response capability is a direct consequence of oil patch F-ups. Prior to the Exxon Valdez spill, there was almost no spill response capability in Prince William Sound. If I remember correctly, there was only a few short sections of boom available in Valdez. Basicaly enough to surround a tanker tied up to the dock. There had been minimal research on viable clean up methods in that environment. Some of the methods used, hot water washing of high energy rocky coastlines for example, were counter productive. Likewise, the Deepwater Horizon event has caused some changes. For example BP's "spill plan" for Macondo was literally cut and pasted from the current Prince William Sound plan. The PWS plan is pretty good, from what I have seen, but not appropriate for the GOM. Not too many sea otters and grizzly bears in Louisiana.

I personally have very mixed feelings about Shell in the Chukchi. Back in the late '80s I worked the first sale in the Chukchi Sea. The explorer side of me would really like to see what's down there. On the other hand, having worked in Alaska for most of my career, I'm reasonably familiar with what they are up against out there in the ice. And their Kulluk fiasco, while not really an arctic issue, doesn't reassure me that they have their act together.

In any case, whether or not Shell finds oil in the Chukchi, the Russians are going full bore on their side of the arctic pond. I know quite a few people who have worked in other parts of the Russian oil patch. From what they tell me about how things work over there I don't have any warm fuzzies that the Russians will be even as careful as Shell is.