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Choose Shell Over Greenpeace For Arctic Oil And Natural Gas

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Jude Clemente2 August 2015

Greenpeace’s ongoing attack on Royal Dutch Shell is a concern for energy resource and thus human development around the world. It failed, but Greenpeace just tried to stop Shell’s icebreaker from leaving port in Portland, Oregon, in the hopes of blocking Shell’s drilling plans in the Arctic. Greenpeacers dangled from ropes off St. Johns Bridge to stop the Arctic drilling ship. A federal judge in Alaska ordered Greenpeace to pay $2,500 for every hour that protesters block the icebreaker from leaving Portland.

If these antics, which erode the value and appeal of “environmentalism” like rich men flying the world telling poor men they can’t because of global warming, sound familiar, they should. Last year in Peru, Greenpeace treaded on an ancient Nazca lines site to promote renewable renewable energy, obviously completely unaware that favored wind and solar energy (used for power generation) don’t displace oil (used for transportation).

As the lone operator looking to drill in North America’s portion of the Arctic Ocean, the attack on Shell is particularly rich. Shell has supported a carbon tax AND a cap-and-trade schemeThink about this for a second: the world’s seventh largest oil and gas company, producing 4 million barrels of oil equivalent each day, supporting laws designed to drastically curtail the use of its products. This would be like Microsoft installing the tagline: “Software Rots the Brain.” I implore you to protect your business Shell, not disparage it – “tora! tora! tora!”

Predictably, Shell’s approach has helped the oil major score exactly 0 points with Greenpeace and other environmental groups. For example, following a Greenpeace campaign, Lego ended its partnership with Shell last year. And oh by the way, Shell spends about $15 billion a year in low income countries, providing jobs and economic security in countries where both are in serious short supply. The appeasement mistake is becoming too common for our energy producers, believing the goal is piecemeal to block drilling, when the ultimate objective is to stop the use of ALL fossil fuels all together, no matter the cost. I guess some people you can never please – nor should you ever try.

Per the International Energy Agency, the Arctic holds an estimated 134 billion barrels of liquids and over 1,680 Tcf of natural gas yet to be discovered, 13% of the global oil resource and 30% of the gas resource. The Arctic retains “democratic hydrocarbons:” the U.S. and Canadian Arctic holds half of all undiscovered Arctic energy resources.

Westerners with the free time to dangle from ropes protesting critical energy development (South African women didn’t have the time to join Greenpeace: they’re too busy walking the equivalent of to the moon and back 16 times each day simply to fetch water) are flawed in their focus on the flat or even declining oil needs of the rich. Poor countries (non-OECD) constitute 83% of the world’s population. Simply put, most of the world doesn’t have adequate access to modern energy systems like oil and natural gas. Per person, rich nations consume 1.5 gallons of oil products per day, compared to 0.33 gallons for the poor.

The poor want and fully deserve the high quality of life that we have. Every day, the global population grows by 210,000 people and the economy expands by $5 billion. Oil and gas demand will therefore continue to increase because they’re 65% of the world’s energy supply. Meeting this undeniable need for more energy will depend on our ability to tap all available resources that can be accessed in a safe and economical way, including the huge potential in the Arctic. Arctic oil production continues to increase, potentially reaching over 4 million b/d in 2030, compared to 1 million b/d this year.

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Sources: IEA, WEO 2014; EIA, IEO 2014

Just as surely as rising oil and gas demand though, hydrocarbon development in the Arctic does present unique challenges. Some 85% of this massive but remote untapped resource is offshore. For example, limited visibility in such extreme weather complicates search and rescue capabilities. Arctic development could mean geopolitical competition, but it could also spark geopolitical cooperation and partnerships, especially given the difficult conditions. We already know that Russia has great plans in the region. The complexity of the business (oil and gas engineers might be the smartest people we have) makes accidents inevitable, but safety is a core value in the production of oil and gas that is required for competitive success.

Oil and gas technologies are always advancing. If Alaska’s Prudhoe Bay oil field was opened with today’s technology, its footprint would be about a quarter of its current size. In fact, the IEA reports that “the same efforts at technical innovation that have enabled oil and gas exploration in the Arctic also enabled U.S. light tight oil to unlock a vast resource that long seemed off-limits.” Safe and successful drilling campaigns were conducted in the 1970s and 1980s in the U.S. and Canadian Arctic, so there’s confidence that drilling in the world’s Arctic basins, the Arctic is the shallowest ocean, is achievable.

Russia’s Sakhalin and Canada’s Hibernia in offshore Arctic each took about two decades to reach commercial production. Considering how long it takes to evolve from exploring to producing, large-scale Arctic development should begin as soon as possible to help meet rising oil and gas demand in the decades ahead. On the heels of the “unconventional” oil and gas revolution, the Arctic could become the next big supply source. And drillers know to be extra cautious. Just two months after the 2010 Deepwater Horizon spill, BP’s market capitalization had been sliced in half to $90 billion. A major oil spill in the Arctic could harmfully turn public opinion: Americans now support Arctic drilling by a ratio of three to one. Do you know it takes oil companies $240 to clean up a single gallon of crude oil?

The higher costs associated with the remoteness of the Arctic, augmented by the more stringent requirements for the offshore industry post-Deepwater Horizon, limits access to the few international or national oil companies with the financial resources. Shell abandoned the Arctic in the late-1990s when oil prices dropped, but prices are forecasted to rise over the mid- to long-term. As prices increase and technologies advance, the global deepwater hydrocarbon quest is only growing. From 2013-2020 alone, deepwater regions could see an investment of $650 billion developing 80 billion barrels of oil equivalent.

Arctic Oil Will Be Increasingly Economical

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SOURCE

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