"Undrillable" Arctic?

Christiana Figueres, formerly head of the U.N. Climate Change Secretariat when the Paris accord was reached by almost 200 nations in 2015, told Reuters by telephone “the Arctic has been rendered undrillable.” The former Costa Rican diplomat who campaigns for a peak in global emissions by 2020 said it made no economic sense to explore in the Arctic, partly because it was likely to take years to develop any finds.

I was thinking, if I was an opponent to Arctic or any other drilling I'd be sure to say it doesn't make economic sense. All offshore fields take years to develop, don't they? Even Norway is pro-Arctic drilling, for frac's sake. So it might actually make sense much as many don't like it.

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Arctic oil would be very expensive to extract given the hard conditions. So it will make economic sense only if the oil price stays above 100 or 120$ for a long time.

They started to consider the development of Arctic oil when oil prices were above 100 $ but after 2014 the projects were abandoned or postponed to a distant future.

As the development of such ressources will take a long time there is a high risk that we will reach the oil peak demand before the Arctic oil flows to the markets.

So I agree with Mrs Figueres, the Arctic oil is undrillable. It's economically too risky.

 

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Well, Statoil says they have a breakeven of $31 a barrel at Johan Sverdrup, so I don't know how uneconomical it is. The Russians are pumping from the Arctic, too, so there has to be something in it.

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(edited)

The Johan Sverdrup oilfield is in the North Sea 140km west of Stavanger so it's not really the Arctic.

It's true that the Russians are pumping in the Arctic at the Prirazlomnaya  oil platform but for me it seems more a technical experiment than a really profitable field.

In a 2016 Barents Observer article they said " Russian oilmen in 2014 argued that Gazprom Neft needed an oil price of a minimum of $80 per barrel to make profits in the project. "

https://thebarentsobserver.com/en/industry/2016/08/champion-arctic-oil

I don't think that the figures have drastically changed since then

 

Edited by Guillaume Albasini
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I'm not sure that all arctic oil is equal in terms of drilling feasibility, but I've always found this largely political discussion to be a bit of a red herring. They turned this into a political battleground and when one side or the other makes a move it's just an easy place to score points. Talk of an arctic drilling ban didn't really upset any explorers i suspect. They were probably relieved. 

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Ah, not Sverdrup, Castberg. My bad. Johan Castberg has a breakeven of $31.

I agree Prirazlomnaya is more of a "Let's see if we can do it," thing but they've had 4 years to lower their costs. Maybe they have, maybe they haven't but it's still producing. 

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It's hart to know what the breakeven for Castberg will really be as it is expected to come on stream in 2022.

The climatic conditions are better in this part of the Barent sea warmed by the Gulf Stream but I find a little bit suspect that the breakeven given for Castberg is the same that the Sverdrup breakeven. Perhaps that you are not the only one to have mixed the two Johan.

https://www.equinor.com/en/news/johan-castberg-operation.html

 

Prirazlomnaya started production in december 2013 in the Pechora Sea but it's still today the only offshore platform in this region.

http://www.gazprom-neft.com/company/business/exploration-and-production/new-projects/prirazlomnoe/

image.thumb.jpeg.a06e8cff4173ef52e6b0c6ed7351179f.jpeg

 

 

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(edited)

One has to consider the source. Christiana Figueres is clearly an environmental extremist because she wants global emissions to peak in 2020.  Obviously if you want emissions to peak by 2020 you don't want any additional oil or gas discovered.  Her extreme views mean that she cannot give a unbiased assessment of the economics of Arctic oil.

 

 

Edited by PeterfromCalgary

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I think, like @TraderTate suggested above, this topic around Arctic drilling is largely a political one. I'm not sure I trust anyone's views on the subject. Everyone has an agenda. All data can be interpreted a variety of ways to support a specific position. TRUST NO ONE. [That probably sounds more paranoid than I intended]

But to @Marina Schwarzpoint, yes, that is exactly what an environmentalist would say, because that's the only argument that Big Oil will listen to. Those silly environmentalists with their Jedi mind-tricks :)

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I agree with $100.00 oïl in the next7 months

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On 5/15/2018 at 3:39 AM, Guillaume Albasini said:

Arctic oil would be very expensive to extract given the hard conditions. So it will make economic sense only if the oil price stays above 100 or 120$ for a long time.

They started to consider the development of Arctic oil when oil prices were above 100 $ but after 2014 the projects were abandoned or postponed to a distant future.

As the development of such ressources will take a long time there is a high risk that we will reach the oil peak demand before the Arctic oil flows to the markets.

So I agree with Mrs Figueres, the Arctic oil is undrillable. It's economically too risky.

 

You may recall that economics do not always dictate investments. Wishful thinking plays a big role.

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10 hours ago, Rodent said:

I think, like @TraderTate suggested above, this topic around Arctic drilling is largely a political one. I'm not sure I trust anyone's views on the subject. Everyone has an agenda. All data can be interpreted a variety of ways to support a specific position. TRUST NO ONE. [That probably sounds more paranoid than I intended]

But to @Marina Schwarzpoint, yes, that is exactly what an environmentalist would say, because that's the only argument that Big Oil will listen to. Those silly environmentalists with their Jedi mind-tricks :)

That's my life motto. It's true for every industry. True for everything, pretty much. We'll see what happens, but it's worth mentioning that Greenpeace tried and failed to sue Statoil for Arctic drilling. 

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I am surprised that no one is concerned about absolute feasibility in terms of EROI numbers. Everything else is secondary. The cost of human labour etc are manageable as long as the EROI holds up. If the EROI is bleak, then drilling will be impossible

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