Shale Presents Competition for Arctic Oil, Gas Development

The vast majority of oil and gas activity will focus on the sub-Arctic regions, and will include platform and pipeline projects, Richardson noted. Liquids-focused projects and shallow water projects will also fare better than gas and deepwater projects, Richardson noted.

The Arctic, which encompasses 21 million square kilometers of acre, or 6 percent of the Earth’s surface, contains substantial untapped resources. To date, 82 discoveries have been made, and 138 billion barrels of oil equivalent of 2P reserves have been found. Only a small portion of these resources have been developed, most in sub-Arctic regions such as the Barents Sea and offshore eastern Canada.

Arctic oil and gas development faces competition not only from unconventional resources, but floating liquefied natural gas, non-Arctic offshore resources and production growth from existing fields made possible through liquefied natural gas.

Arctic oil and gas exploration and production also faces challenges from the fluctuations in oil prices and rising project development costs. Richardson noted that the price of Brent crude is forecast to decline to $92/bbl by the end of the decade, and the major divergence seen in global gas benchmarks – and outlook for the global gas market to remain regionally focused – could present challenges for determining whether projects are economically feasible.

Unconventionals pose the greatest competition not only for Arctic exploration and production, but to the deepwater Gulf of Mexico as well. In 2007, 183 deepwater development projects were planned in the U.S. Gulf; last year, 31 were announced. The number of shallow water platforms installed in the U.S. Gulf also declined from 84 in 2007 to six in 2013.

For Arctic exploration and production to continue, the oil and gas industry must learn to adapt to lower commodity prices and capex as well as intense competition from other sources, Richardson noted.

Oil price will remain the most important factor in the equation of whether Arctic exploration and production is commercially feasible, said Abdel Ghoneim, engineering manager with Atkins Global, during a panel presentation at the conference. A good public image is the second most important factor after oil price that will decide the future of Arctic exploration.


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Doug Matthews  |  February 14, 2014
The 1980s slowdown in the Canadian Beaufort was the result of a combination of lower world prices and the end of Canadas National Energy Program, a program that provided significant public financial support to companies drilling in the Beaufort.