The Case for Exploring the Arctic

A National Petroleum Council report on U.S. Arctic oil and gas potential outlines a strong case for developing those resources.

And, recent massive discoveries offshore Alaska’s North Slope by Repsol, Armstrong Oil and Gas and Caelus Energy have certainly validated that case, and then some.

The report, “Arctic Potential – Realizing the Promise of U.S. Arctic Oil and Gas Resources,” was requested in recent years by the U.S. secretary of energy. It acknowledges environmental, cultural and other concerns. The comprehensive study involved more than 250 experts from industry, academia, government, native and environmental communities.

Four participants in the study recently discussed the findings in a panel discussion at the Arctic Technology Conference (ATC).

“Our NPC panel members bring a broad knowledge of this important piece of work,” said Brian H. Miller, execution readiness manager, Alaska projects for SIEP and OTC board chair for the ATC. The speakers highlighted critical aspects of the study and answered questions.

Co-chaired by Mark Fesmire, Alaska region director, Bureau of Safety and Environmental Enforcement, and Mike Prins, senior adviser, Arctic, ExxonMobil Upstream Engineering Skill Center, the panel included:

  • John Guy, deputy executive director, National Petroleum Council
  • Mitch Winkler, Arctic senior technical advisor, Shell
  • Tim Nedwed, oil spill response senior technical professional advisor, ExxonMobil
  • Larry Hinzman, vice chancellor for research, University of Alaska Fairbanks

The report said further “exploration and development in the U.S. Arctic would enhance national, economic, and energy security, benefit the people of the North and the U.S. as a whole, and position the U.S. to exercise global leadership.”

Opportunity

It also acknowledged “diverse views on how to balance this opportunity with environmental stewardship,” according to the report’s executive summary.

In addition to oil and gas potential, interest is growing in Arctic tourism and reduction in summer ice offers more opportunity for marine traffic, the Council said.

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A National Petroleum Council report on U.S. Arctic oil and gas potential outlines a strong case for developing those resources.

And, recent massive discoveries offshore Alaska’s North Slope by Repsol, Armstrong Oil and Gas and Caelus Energy have certainly validated that case, and then some.

The report, “Arctic Potential – Realizing the Promise of U.S. Arctic Oil and Gas Resources,” was requested in recent years by the U.S. secretary of energy. It acknowledges environmental, cultural and other concerns. The comprehensive study involved more than 250 experts from industry, academia, government, native and environmental communities.

Four participants in the study recently discussed the findings in a panel discussion at the Arctic Technology Conference (ATC).

“Our NPC panel members bring a broad knowledge of this important piece of work,” said Brian H. Miller, execution readiness manager, Alaska projects for SIEP and OTC board chair for the ATC. The speakers highlighted critical aspects of the study and answered questions.

Co-chaired by Mark Fesmire, Alaska region director, Bureau of Safety and Environmental Enforcement, and Mike Prins, senior adviser, Arctic, ExxonMobil Upstream Engineering Skill Center, the panel included:

  • John Guy, deputy executive director, National Petroleum Council
  • Mitch Winkler, Arctic senior technical advisor, Shell
  • Tim Nedwed, oil spill response senior technical professional advisor, ExxonMobil
  • Larry Hinzman, vice chancellor for research, University of Alaska Fairbanks

The report said further “exploration and development in the U.S. Arctic would enhance national, economic, and energy security, benefit the people of the North and the U.S. as a whole, and position the U.S. to exercise global leadership.”

Opportunity

It also acknowledged “diverse views on how to balance this opportunity with environmental stewardship,” according to the report’s executive summary.

In addition to oil and gas potential, interest is growing in Arctic tourism and reduction in summer ice offers more opportunity for marine traffic, the Council said.

In the global arena, the report noted that Russia is drilling new exploration wells in the Kara and Pechora seas and expanding its fleet. China does not hold any Arctic territory but is investing heavily in research, infrastructure and resource development in the region, the Council said.

The Council said the large U.S. Arctic oil and gas potential, much of it still undiscovered and offshore, could contribute mightily to meeting U.S. and global energy needs and the technology to develop it exists today.

Meanwhile, regulatory practices developed in non-Arctic regions are limiting activity in the Arctic, the report said.

Also, realizing the region’s promise “requires public confidence that the opportunity can be safely pursued while ensuring environmental stewardship,” the Council said.

The study recommended more research to validate current offshore technology and pursue improvements to enhance safety, environmental protections and cost performance.

Recommendations were grouped into three themes:

  • Environmental stewardship
  • Economic viability
  • Government leadership and policy coordination

The Council noted that the current resurgence of production in the U.S. Lower 48 eventually will decline.

That is one reason given to pursue the Arctic now.

Alaskan exploration and development entails long lead times compared to other regions. If development starts now, production will contribute substantially to U.S. energy security in the 2030s and ‘40s, according to the report.

The study also notes the impact on the state of Alaska, which gets some 90 percent of its general revenue and one-third of its jobs from oil and gas activities.

The report states: “Opportunities would be created throughout the state in both high paying, long-term, year-round jobs and in seasonal and short-term jobs. Of the 6,000 oil and gas sector jobs, about 3,900 could be long-term, year-round jobs. It is estimated that total national annual average employment from OCS development – including all the direct, indirect, and induced employment – could be about 35,000 per year on average through 2057, with a peak employment of over 50,000 in 2038. Total wages and salaries associated with OCS development over the 50-year period are estimated to be about $72 billion.”

Environment

Environmentally, the Arctic is challenging, but fairly well understood after decades of experience.

Ice type and abundance, water depth and length of open water season are key factors.

Scientists have monitored important animal species in exploration and production areas for more than 30 years and found no long-term negative effects, the Council said.

They also said mitigation efforts to protect animal populations and subsistence hunting are working, but can be improved.

The ecological impacts of spills and other chemical releases are of concern and have been studied for years worldwide. The report found that there have been “substantial” technological and regulatory advances to reduce the possibility and consequences of spills.

Important developments in avoiding environmental impact include blowout preventers, capping stacks and subsea isolation devices.

“The risk of a spill can never be completely eliminated, so effective oil spill response capability is also critical,” the report states.

Production

The industry has a long history of successful operations in Arctic conditions. Advances in the Arctic and elsewhere have allowed the industry to continue and expand operations while reducing environmental impacts, the report said.

Also, most of the conventional U.S. Arctic offshore potential can be tapped with field-proven technology.

Most of those resources are in less than 100 meters of water in areas where exploration is possible during summer and shoulder seasons with floating rigs. Development and production are possible with bottom-founded facilities and support vessels, methods already shown to be successful.

Operating is the Arctic is more expensive, however. Rugged climate, remoteness, lack of infrastructure and short operating seasons mean economic viability hinges on finding large, high-quality resources, the report said.

Regulation

Current regulations also hinder the economic viability of Arctic projects and should be updated and tailored to reflect the challenges of the region, the report recommended.

“An efficient regulatory framework with a clear process and a predictable timeline would support investment in challenging exploration activities. Two particular factors – drilling season length and lease length – currently have substantial negative implications for oil and gas exploration in the Alaska OCS,” the report stated.

Because resources are larger, but spread less densely over wide areas than places like the Gulf of Mexico, more time and more exploratory wells are needed to lay the groundwork for development.

“In addition to extending the lease time available for exploration, holding more frequent and predictable lease sales would also improve the ability to plan and execute exploration programs, particularly important in an area with a short working season,” the report said.

The Council also said both industry and government must engage local communities to gain and secure public confidence, which it called a key to realizing the promise of Arctic oil and gas resources.