The Obama administration could squander major domestic crude oil resource opportunities in Alaska if it persists in imposing overly stringent leasing restrictions and operating regulations, an American Petroleum Institute official warned.
“We see the Alaska offshore as a very promising resource, with billions of barrels in the Beaufort and Chukchi seas,” API Upstream Operations Director Erik Milito said. “Over the long term, the industry is going to remain very interested. But there’s a lot of hesitation because of uncertainty about policies covering development there.”
Highly prescriptive federal requirements could limit the oil and gas industry’s ability to develop versatile programs tailored to the US Arctic, particularly if they fail to recognize the region’s short drilling season, he told OGJ on Nov. 24.
“We have to recognize that while these are Arctic conditions, a log of wells have been drilled historically up there around the world,” Milito said. “The prescriptive level of regulation we’re seeing is not warranted.”
He spoke not long after Statoil became the second company to withdraw from Chukchi Sea leases it won in a 2008 federal sale (OGJ Online, Nov. 17, 2015). Shell Offshore Co. mad a similar decision a few weeks earlier (OGJ Online, Sept. 28, 2015).
“If you consider what Shell experienced, there were several years before it could drill even one well,” Milito said. “We need to have a program in place so companies holding Alaskan offshore leases can execute drilling plans to assess probably and possible reserves. With a regulatory regime that doesn’t recognize shorter drilling seasons up north, it becomes too difficult. Additional regulations which apply across the US Outer Continental Shelf won’t make it any easier.”
Recent NPC report cited
Milito noted that a National Petroleum Council report this past spring said the oil and gas industry has a of long history of successfully operating in Arctic conditions, and that most of the US Arctic’s offshore conventional oil and gas resources can be developed using existing field-proven technology (OGJ Online, Mar. 27, 2015).
“It looks as if the administration did not consider what this report, which the Energy Secretary requested, says about the US Arctic as it proposed new offshore regulations,” Milito said.
Other Arctic nations are moving ahead in the meantime, he said. “There’s a significant production occurring off the east coast of Canada, and Russia and Norway have significant Arctic operations,” he said. “So there’s considerable experience which could be applied to encourage more research and investments by our own government and universities.”
Milito said several API member companies continue to work with Alaska’s state government and universities not only because there are major potential resources offshore, but also onshore in areas like the National Petroleum Reserve-Alaska. “In terms of long-term security, this could elevate the nation’s status as a global energy superpower,” he said.
Producers consider energy development a long-term investment, which requires the best data available to make the right decisions, he said. “At the same time, we can’t stop,” Milito said. “It’s become a somewhat circular process, but in the end, we don’t have government policies which are favorable toward energy development in Alaska.”
Contact Nick Snow at [email protected].