U.S. drilling in the Arctic will be needed in the future to diversify supply and provide energy security, even with the boon in oil and gas production from hydraulic fracturing and shale, the oil industry says.
One of the reasons for increasing the U.S. presence in the Arctic is rising global strife, which is causing the country to be looked at as a source of stability in the global oil market, industry officials say.
“We are seeing a lot more of the geopolitics being brought into the discussion,” Erik Milito, the American Petroleum Institute’s director of upstream resources, told a small group of reporters Friday in Washington during a special briefing on the Arctic.
Milito underscored that “energy security” and recognizing that oil and gas will be a part of the energy mix through the middle of the century are increasingly important aspects when considering drilling in the Arctic.
He said that stopping exploration and drilling on the outer-continental shelf would only cede leadership to another country such as Russia, which would not be good for either the U.S. or its allies, which are becoming reliant on U.S. oil as a hedge against global instability.
“We have the global economy and our allies looking to the U.S. more and more as becoming a stable swing producer, given where we’ve gone with … shale energy development,” Milito said. “And if we can complement that with maintaining our offshore [resources] in the Gulf, potentially the Atlantic, and … with Alaskan resources, then we may be a secure supplier that more of the world is looking to, so that when there are disruptions its not going to be a situation where the world is relying on Russia or Iran, or anyone like that.”
He pointed out that even President Obama has acknowledged the need for oil and gas production into the future after approving a new lease sale for oil company Shell to drill offshore in Alaska.
Nevertheless, the oil industry recognizes that there is a disconnect between public opinion about drilling in the Arctic and what is feasible, including the level of risk inherent in producing in the icy north.
In the weeks that followed the administration’s approval of the Shell lease, protests by environmental groups and activists have been strong and persistent. Groups waged campaigns illustrating that the risks of a spill in the Arctic are too great to allow further drilling approvals.
Milito and API’s leading Arctic expert, Richard Ranger, acknowledge those hurdles in trying to get across the need for offshore drilling in Alaska. Ranger said one hurdle is convincing the public that the oil industry has the competency and expertise to drill in the Arctic. He says the popular misconception is that the industry doesn’t have a lot of experience drilling there and dealing with the challenges that come from icy seas and extreme cold.
There is also the perception that only a few major companies are drilling in Alaska. Ranger says a number of independent firms are now drilling there, along with large international companies that include Italy’s ENI, Norway’s Statoil and Spain’s Repsol.
Ranger says the U.S. industry needs to convince the public that the capability is there and it is growing.
The industry also is facing these misconceptions in convincing the Obama administration that the Interior Department’s new Arctic drilling rules are overly prescriptive and could hinder drilling instead of expanding it.
Ranger said the “policy strategy needs to be informed by the facts,” and that comes from the government’s Energy Information Administration and energy companies’ own projections for increased production.
Ranger explains that those projections are not done in a vacuum, ignoring other resources like coal and renewables, but are examined in a reasonable way to anticipate demand. Milito says the industry anticipates a 30 percent increase in oil production through 2030.
The EIA says there will be about 10 million barrels a day produced by the middle of the century. About 2.4 million barrels a day of that total come from offshore, he said.
Eirik Waerness, lead economic strategist for Norwegian giant Statoil, was in Washington earlier in the week discussing his company’s projections for oil and gas production until 2040. He said that even in scenarios where climate change policies reduce fossil fuel consumption, oil and gas would continue to grow.
Waerness said his projections have a “very important message” to deliver: “In all these scenarios oil and gas are here to stay.”
