Daily Management Review

Trump draws a bead on oil in the Arctic Refuge


The Trump administration is trying to lay the foundation for the opening of the Arctic National Wildlife Refuge (ANWR) for drilling oil and gas wells.

This is a rather complicated project, and there is no guarantee that it will work, but the Ministry of Internal Affairs hopes to open a possibility for drilling processes in ANWR, which has not been conducted for several decades.

According to the Washington Post, the Ministry of the Interior is working to authorize seismic testing, which is a necessary process before drilling. The agency itself does not have an authority to drill - only legislation approved by Congress can officially open ANWR for this industry.

However, the Interior Ministry says it can begin the process by allowing seismic tests to be carried out if the congress at some point suggests ANWR territory to oil and gas companies.

Drilling on the ANWR territory was an extremely controversial issue, on which several administrations, Democrats and Republicans has been clashing for years. But, given that the Republicans control both the congress and the White House, the prospect of a final drilling permit in ANWR seems more real than ever.

"The administration is very cautious trying to move forward with the issue of drilling, which is a process that has been going on for many years," said Jamie Rappaport, Director General of Defenders of Wildlife, who led the organization under President Bill Clinton.

This is a gamble that is likely to face lawsuits from environmental groups that will fight to prevent drillers from untouched parts of the wild.

The Alaska delegation in Congress is desperately trying to find a new source of oil supplies, as the state's products have been experiencing a long-term decline for decades. In the late 1980's, production reached only 2 million barrels per day, but since then it has declined.

For most of this year, the state's output was just over 500,000 barrels per day, although in June the figure fell below this level, according to the latest data.

Without new supplies, the Trans-Alaska pipeline faces an uncertain future. Operation below the required volumes leads to operational problems.

Water can freeze in a pipe, the wax may harden, requiring more frequent cleaning and resulting in downtime. At some point, if production falls below a certain level, the pipeline will run intermittently.

This raises the cost of new sources of supply.

So far, however, it is not clear whether the industry is interested in ANWR. In the past, before the oil shale revolution, when oil production on land was declining, ANWR was highly valued. Interest grew when oil prices traded at $ 100 per barrel.

In recent years, this attitude has been fading away slowly but surely. The profitability of production in North Alaska, especially when the resource base situation is unknown, is questionable at best. In the foreseeable future, production in the waters of Alaska will cease: Royal Dutch Shell stopped the drilling campaign in the Chukchi Sea in 2015, when it received disappointing results in conditions of low oil prices.

One could give a better example for drilling on land in ANWR, but since there has been no activity so far, the industry would have to start practically from scratch.

Old seismic studies of the 1980s. say that ANWR contains about 7.7 billion barrels of technically recoverable oil, but the industry will need to conduct new seismic studies using updated equipment and technologies.

On the other hand, since companies such as ConocoPhillips have drilled complex projects, even when oil prices were low, they may be interested in ANWR.

source: washingtonpost.com