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Arctic drilling: Why oil won’t be flowing anytime soon

Arctic drilling: Why oil won’t be flowing anytime soon thumbnail

Shell’s Arctic campaign this year will be pivotal. If the company cannot find large reserves of oil, it will likely set back Arctic oil development for a generation.

The Financial Times reported that Royal Dutch Shell will not see Arctic oil come online anytime soon, even in the best of scenarios. Even Shell officials think that the oil major will not be able to see Arctic oil hit the market until sometime in the 2030s. (Related: Shell Approval May Trigger Resource Race In The Arctic)

There are a few reasons for this. Finding and developing offshore oil can typically take around a decade. First there is a long lead time before any drills hit the waters – analyzing data, purchasing acreage, planning, doing seismic surveys, getting permits, moving equipment into place, and finally deploying rigs. Shell first started buying up Arctic leases in 2007. After years of preparation (and huge setbacks), Shell has done most of this pre-drilling work.

Even then, once the rigs ply the icy waters, there are many years ahead before oil begins flowing. Shell has to drill test wells, analyze data, and drill more wells.

But the Arctic also presents some unique challenges not found anywhere else. First is the short drilling season. Shell wouldn’t be able to operate year round, and could only make headway a few months out of the year during the summer. Perhaps more importantly is the remote location. Without adequate infrastructure Shell would have to do a lot of building to make Arctic oil viable. That would include pipelines, processing facilities, roads, and more. The Gulf of Mexico has all of this stuff in place, which reduces the cost and risk of drilling, but the Arctic is uncharted territory. (Related: Texas Floods Affect Some Oil Wells, Refineries Mostly Unaffected)

Then there is the regulatory side of things. The FT reported that Shell executives admitted that the pace of regulatory approval would likely push the first flows of oil into the 2030s. There are a lot of permits that Shell needs to obtain, which can delay operations.

In order for all of these obstacles to make financial sense, there must be a huge pool of oil that is worth going after. “The potential is here for this to be a world-class, absolutely key resource, with tremendous volumes,” Marvin Odum, Shell’s top official on oil and gas production in the Americas, told the FT. “The size of the prize here is worth the effort. We just have to demonstrate whether or not it’s there.”

Christian Science Monitor

18 Comments on "Arctic drilling: Why oil won’t be flowing anytime soon"

  1. Makati1 on Thu, 28th May 2015 9:09 pm 

    Davy, in reply to your previous comment, now below the line:

    With a few notable exceptions, most of us agree that NET petroleum energy has peaked long ago, despite the Capitalist propaganda beating the drums otherwise. Discussing those articles is like rehashing old topics. Nothing new except how soon or to what extent our future will end.

    However, all other topics are under debate and I will continue to put down the Empire of Chaos whenever I think it is appropriate. It deserves as much negative press as possible because of what it is doing to the people and things I care about, not the Rule of Law and Bill of Rights it was founded upon. Those are long gone.

    Not since Hitler has one government tried to enslave the rest of the world to it’s wants as has the USA in the last 20 years. It once used diplomacy and money to do so, but has resorted to terrorism because too many of the other 7 billion people in this planet, were resisting. It no longer has real “Diplomats” and is the world’s biggest debtor. It is destroying the civilization we need to exist, in the name of “Democracy” when it is no longer more than a shadow of the same.

    Democracy cannot be forced on a people/country that does not want it or has not evolved to the point where it is possible. Too many recent examples to name, but you know that, if you are as open minded as you claim.

    I am aware that the rest of the world is not perfect, including Asia. but they are NOT trying to destroy the world and cause possible extinction of my family and the rest of life on this planet. The EofC is trying with all of it’s failing might and is destroying America to do so.

    Yes, I know the billionaire elite rule, but they are few and we are many. When the SHTF, and it will, I hope they are ALL at the end of a stiff rope or divided by a sharp blade along with all of their puppets.

    So, EofC bashing may get toned down but it will not disappear. As I have said, just don’t read my comments if you don’t like what I say. Others ignore me. Flag waving does not prove “patriotism” to me. In most instances it proves that American’s are brainwashed and beyond help. I saw that when I was back in the States. Prove me wrong.

  2. Makati1 on Thu, 28th May 2015 9:26 pm 

    CSM is hardly an expert on Petroleum or anything of importance in the world. It does have a large readership, mostly religious types who are closed minded about many things. It is owned by a church, and has a board that censors it’s articles. It claims to be unbiased, but … so does every news outlet owned by the six big corporations of America, which is most of them. There are no pure news sources today. Maybe never has been, but today’s are obviously twisted. The article above seems to be an ad for Shell, supported by another questionable rag, the Financial Times. Nothing more.

  3. Plantagenet on Fri, 29th May 2015 12:41 am 

    This is hardly an ad for Shell—-if you’d actually read the article you would’ve known that the FT article is quite pessimistic about the likelihood of any oil production until 2030. The only good news is that there is the potential for some very large oil fields in the Chukchi Sea.

  4. tita on Fri, 29th May 2015 12:45 am 

    That’s why they report the news from And this article makes sense. Telling that getting oil from arctic will be a long and costly road is not stupid.

  5. joe on Fri, 29th May 2015 4:00 am 

    What an investor wants to hear is 2 things, can I get a discount if I invest now, 2 where is my hedge. Of course there is oil but the question is obviously how much and where. Artic seas are relatively shallow, so getting the oil won’t be as hard as they say, that’s the discount, the hedge though….
    That the feel that they will need to go to try to find oil there, now, tells me all I need to know about peak oil.
    States now own the best of the rest and the market is going to struggle at the fringes. Of course the rule of thumb is the more they explore the less they find as the explore the best areas first. So expect a few big finds then an oil rush, then a big let down. For investors it’s all in the timing.

  6. Perk Earl on Fri, 29th May 2015 7:16 am 

    Not sure what story to paste this story in, so this is as good as any. This is a great article.

    ‘Study Concludes When Civilization Will End, And It’s Not Looking Good for Us’

    The report, written by applied mathematician Safa Motesharrei of the National Socio-Environmental Synthesis Center along with a team of natural and social scientists, explains that modern civilization is doomed.

    Motesharrei’s report says that all societal collapses over the past 5,000 years have involved both “the stretching of resources due to the strain placed on the ecological carrying capacity” and “the economic stratification of society into Elites [rich] and Masses (or “Commoners”) [poor].” This “Elite” population restricts the flow of resources accessible to the “Masses”, accumulating a surplus for themselves that is high enough to strain natural resources. Eventually this situation will inevitably result in the destruction of society.

    Technological change can raise the efficiency of resource use, but it also tends to raise both per capita resource consumption and the scale of resource extraction (yeah its called Jevon’s Paradox)

    Economic growth is the biggest destroyer of the ecology. Those people who think you can have a growing economy and a healthy environment are wrong.

    In maybe the nicest way to say the end is nigh possible, Motesharrei’s report concludes that “closely reflecting the reality of the world today … we find that collapse is difficult to avoid.”

  7. rockman on Fri, 29th May 2015 7:33 am 

    So some think it might take a “long time” to being oil production in the Arctic…15+ years.

    Let’s put that into perspective:

    The first DW GOM discovery was in 1975 (Cognac Fld)…40 years ago. It went on production 4 years later.

    Other discoveries followed. By 1985 (10 years after the first discovery) the DW GOM was producing 57,000 bopd. And 20 years after the first discovery it was doing 150,000 bopd. And 30 years after that first discovery it was doing 890,000 bopd. And today, 40 years after that first discovery, it’s doing about 1.2 million bopd.

    Not bad, eh? Of course some might be surprised to learn that over 350 DW GOM fields have been discovered and developed. They are on 709 federal leases that cover about 3.5 million acres.

    Significant oil production coming from the Arctic (if there really is a lot of commercial oil up there) in the next 15 to 20 years? Sure…why not? It will be so much quicker to develop fields in the Arctic…piece of cake. LOL

  8. Perk Earl on Fri, 29th May 2015 8:08 am

    Economy shrank 0.7% in the first quarter

    Gross domestic product — the value of goods and services produced in the U.S. — contracted at a seasonally adjusted annual rate of 0.7% in the January-March period, the Commerce Department said Friday. That’s well below the modest 0.2% growth the government initially estimated.

  9. Davy on Fri, 29th May 2015 8:52 am 

    Perk, I saw that on ZH. Remember the actual shrinkage is worse. I read a couple of articles on the BLS adjusting the seasonal adjustments to massage down the true extent of the drop.

    At some point there will be no fudge room. There are limits even with fudging IOW distortions and manipulation based lies. The spreadsheet goal seeking will turn into number painting according to what is policy.

  10. Mike989 on Fri, 29th May 2015 9:24 am 

    If there’s no oil till 2030 then there will Never Be any oil.

    That’s 5 generations of solar, wind, EV’s and Batteries. No major oil company will have the funds to “invest” in the Most Dangerous and Most Expensive place on earth to get oil.

    They’re at a dead end. Either they invest in solar to WIN our they go into bankruptcy.

  11. GregT on Fri, 29th May 2015 10:16 am 

    Better to invest in food production Mikey. Somehow, I don’t think that most people will be nearly as concerned with keeping the lights on at night, as they will be with where their next meals will come from.

  12. Dredd on Fri, 29th May 2015 12:58 pm 

    Got Arctic ports?

    The ports where oil is delivered and shipped are built at sea level.

    The sea level port is an endangered species (Why Sea Level Rise May Be The Greatest Threat To Civilization – 2).

    Ditto for Petroleum Civilization.

  13. Dredd on Fri, 29th May 2015 1:04 pm 

    Cold poison is still poison.

  14. BobInget on Fri, 29th May 2015 2:03 pm 

    This is only slightly off topic: India’s Heat Attack

    Here’s where water shortage has the potential to kill tens of thousands in one fell swoop.

    Time is not far off when nations will be so preoccupied by climate changed disasters
    we won’t have time, money or energy to travel 5,000 miles just to burn some poor slob’s village.

  15. Apneaman on Fri, 29th May 2015 3:50 pm 

    Bob, the consequences of AGW are many and will go on longer than we will.

    Texas, Oklahoma Floodwaters Contain Sewage, Other Pollutants
    When deluges sweep away buildings and inundate towns, contamination from sewage and chemicals becomes a threat.

  16. rockman on Fri, 29th May 2015 4:12 pm 

    Dredd – Actually it’s unlikely any oil would make land fall in the area. Most likely it would be pumped directly into tankers and shipped anywhere in the world. OTOH the vessels servicing the ops will need some local support.

  17. Makati1 on Fri, 29th May 2015 5:55 pm 

    Sorry, Plant, but it IS an ad for Shell. The name was used 12 times in this short article. What will you remember? Shell! Not what it really said. Your subliminal mind does not work like your conscious mind. It remembers and uses info in a different way. You are being fed ads subliminally all of your life unless you live in a cave and never go out. Ask any psychiatrist, psychologist or propaganda minister if you do not believe me.

  18. Ted Wilson on Fri, 29th May 2015 10:07 pm 

    After all snow in Arctic melts, Oil companies will happily drill and produce Oil.

    And Oil companies will still say that Global Warming is Hoax.

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