Tag Archives: Arctic oil pollution

Pledge and Renege: Drilling for Oil in the Alaska Arctic

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The Biden administration approved the massive Willow oil-drilling project in the Alaskan Arctic in March 2023 over the objections of environmentalists and many Democrats who wanted the project scuttled. The green light means Houston-based ConocoPhillips can start construction on its roughly $7 billion project in Alaska’s National Petroleum Reserve, which the company expects will produce about 180,000 barrels of oil a day at its peak—equivalent to about 40% of Alaska’s current crude production…The Bureau of Land Management (BLM) has estimated that oil and gas extracted from its recommended version of the Willow project would generate more than 270 million metric tons of carbon dioxide over the project’s lifetime. 

The approval paves the way for ConocoPhillips to build an airstrip, more than 430 miles of ice roads and nearly 270 miles of individual pipelines, among other infrastructure, according to the BLM’s environmental review of the project… 

The company, which is the largest crude producer in Alaska, sits on abundant reserves in the state. As of the end of 2021, it owned about 1.6 million net undeveloped acres in the state, according to ConocoPhillips. Approval of the project means that ConocoPhillips now has a hub from which to further expand into Alaska… The initial build-out from Willow will allow ConocoPhillips to develop more wells and infrastructure in the coming years, he said. “It will be in many ways the gift that keeps on giving…”

Excerpts from Benoît Morenne, Biden Administration Approves Willow Oil-Drilling Project in Alaskan Arctic, WSJ, Mar. 13, 2023

Loving Oil in Any Way, Shape or Form — Damn Climate Change!

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Many oil assets are ending up in the hands of private-equity (PE) firms. In the past two years alone these bought $60bn-worth of oil, gas and coal assets, through 500 transactions… Some have been multibillion-dollar deals, with giants such as Blackstone, Carlyle and KKR carving out huge oilfields, coal-fired power plants or gas grids from energy groups, miners and utilities. Many other deals, sealed by smaller rivals, get little publicity. This sits uncomfortably with the credo of many pension funds, universities and other investors in private funds, 1,485 of which, representing $39trn in assets, have pledged to divest fossil fuels. But few seem ready to leave juicy returns on the table.

As demand for oil and gas persists while dwindling investment in production limits supply, prices are rising again, boosting producers’ profits….And discounts imposed on “brown” assets by the stock market, linked to sustainability factors rather than financial… create even more pockets of opportunity…The Economist has looked at 8 PE firms that have closed fossil-fuel deals in 2020-2021 The investors in some of their latest energy-flavored vehicles include 53 pension funds, 23 universities and 32 foundations. Many are from America, such as Teacher Retirement System of Texas, the University of San Francisco and the Pritzker Traubert Foundation, but that is partly because more institutions based there disclose pe commitments. The list also features Britain’s West Yorkshire Pension Fund and China Life. Over time, some investors may decide to opt out of funding their portion of fossil-fuel deals.

But a third, yet more opaque class stands ready to step in: state-owned firms and sovereign funds operating in the shadows. Last month Saudi Aramco, the Kingdom’s national oil company, acquired a 30% stake in a refinery in Poland, and Somoil, an Angolan group, bought offshore oil assets from France’s Total. In 2020 Singapore’s GIC was part of the group that paid $10bn for a stake in an Emirati pipeline.

Excerpts from Who buys the dirty energy assets public companies no longer want?, Economist, Feb. 12, 2022

Who Will Rule the Arctic?

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Rosatom joined the Arctic Economic Council*in February 2021. Rosatom is a Russian state-owned corporation supplying about 20% of the country’s electricity. The corporation mainly holds assets in nuclear power and machine engineering and construction. In 2018, the Russian government appointed Rosatom to manage the Northern Sea Route (NSR). The NSR grants direct access to the Arctic, a region of increasing importance for Russia due to its abundance of fossil fuels. Moreover, due to climate changes, the extraction of natural resources, oil and gas are easier than ever before.

Since Russia’s handover of NSR’s management, Rosatom’s emphasis on the use of nuclear power for shipping, infrastructure development and fossil fuel extraction is likely to become more prevalent in the Arctic region. Rosatom already operate the world’s first floating nuclear power plant in the Siberian port of Pevek and is the only company in the world operating a fleet of civilian nuclear-powered icebreakers…The company has numerous plans up its sleeves, among them to expand the fleet of heavy-duty nuclear icebreakers to a minimum of nine by 2035.

*Other members of the Arctic Economic Council.

Excerpt from Polina Leganger Bronder, Rosatom joins Arctic Economic Council, BarentsObserver, Feb. 8, 2021

The Unbankables: Fossil-Fuel Companies

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Defenders of the oil-and-gas industry in Washington are fighting back against big banks who want to stop financing new Arctic-drilling projects, fearing it could be a harbinger of an unbankable future for fossil-fuel companies. Five of the six largest U.S. banks— Citigroup, Goldman Sachs,  JPMorgan Chase, Morgan Stanley, and Wells Fargo have pledged over the past year to end funding for new drilling and exploration projects in the Arctic.  Alaska Sen. Dan Sullivan has been lobbying the Trump administration to examine whether the federal government can prevent banks from cutting off financing.

“That these banks would discriminate against one of the most important sectors of the U.S. economy is absurd,” Mr. Sullivan said in an interview. “I thought it was important to push back.” The American Petroleum Institute, one of industry’s most influential lobbying groups, has said it is working with the Trump administration on the issue, which it called a “bad precedent.” API, Mr. Sullivan and others have also suggested the White House should examine whether it could cut off the banks’ access to funding under coronavirus relief packages.

Wall Street has been pulling back from the oil-and-gas industry after years of dismal returns from it and is under increasing pressure from environmentalists and others to limit fossil-fuel lending. While broader market conditions during the coronavirus pandemic this year have dried up capital for new exploration, some analysts have said a lack of bank financing could deter drilling in the Arctic National Wildlife Refuge, which the administration opened to exploration in August 2020…

Capital flight remains one of the primary risks facing the oil industry, according to Moody’s Corp. If the world were to accelerate a transition to renewable sources of energy, oil-and-gas reserves could become uneconomic and turn into a credit liability for producers, making it difficult to access longer-maturity loans, Moody’s said.

Alaska’s economy is almost entirely dependent on the fossil-fuel industry, which has historically funded about 90% of the state’s general fund through tax revenues. Energy executives worry the pledges that banks are making could spread to other regions and parts of the industry as pressure mounts from environmental groups, and companies face the prospect of tighter government regulations. This week, JPMorgan pledged to push clients to align with the Paris climate accord and work toward global net zero-emissions by 2050.

“If it is successful, why would they stop with the Arctic?” said wildcatter Bill Armstrong, founder of Armstrong Oil & Gas Inc., which has discovered more than 3 billion barrels of oil in Alaska. “A lot of misguided people are trying to make oil and gas the new tobacco.”

Excerpt from Christopher M. Matthews and Orla McCaffrey, Banks’ Arctic Financing Retreat Rattles Oil Industry, WSJ, Oct. 9 2020

Fish, Gas and Minerals: the Arctic

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Mr Xi has been showing a growing interest in Arctic countries. In 2014 he revealed in a speech that China itself wanted to become a “polar great power”..,,In January 2018 the Chinese government published its first policy document outlining its Arctic strategy.

China is also keen to tap into the Arctic resources that will become easier to exploit as the ice cap retreats. They include fish, minerals, oil and gas. The region could hold a quarter of the world’s as-yet-undiscovered hydrocarbons, according to the United States Geological Survey. Chinese firms are interested in mining zinc, uranium and rare earths in Greenland.

As the ice melts, it may become more feasible for cargo ships to sail through Arctic waters. China is excited by this possibility (its media speak of an “ice silk road”). In the coming decades such routes could cut several thousand kilometres off journeys between Shanghai and Europe. Sending ships through the Arctic could also help to revive port cities in China’s north-eastern rustbelt… China is thinking of building ports and other infrastructure in the Arctic to facilitate shipping. State-linked firms in China talk of building an Arctic railway across Finland.

Chinese analysts believe that using Arctic routes would help China strategically, too. It could reduce the need to ship goods through the Malacca Strait, a choke-point connecting the Pacific and Indian oceans. Much of China’s global shipping passes through the strait. It worries endlessly about the strait’s vulnerability to blockade—for example, should war break out with America.

There are no heated territorial disputes in the Arctic, but there are sensitivities, including Canada’s claim to the North-West Passage, a trans-Arctic waterway that America regards as international—ie, belonging to no single state.

Plenty of non-Arctic countries, including European ones, have similar dreams. But China is “by far the outlier” in terms of the amount of money it has pledged or already poured into the region, says Marc Lanteigne of Massey University in New Zealand. Its biggest investments have been in Russia, including a gas plant that began operating in Siberia in December 2017. Russia was once deeply cynical about China’s intentions. But since the crisis in Ukraine it has had to look east for investment in its Arctic regions.

The interest shown by Chinese firms could be good news for many Arctic communities. Few other investors have shown themselves willing to stomach the high costs and slow pay-offs involved in developing the far north…. The main concern of Arctic countries is that China’s ambitions will result in a gradual rewiring of the region’s politics in ways that give China more influence in determining how the Arctic is managed. Greenland is a place to watch. Political elites there favour independence from Denmark but resist taking the plunge because the island’s economy is so dependent on Danish support. The prospect of Chinese investment could change that. Should Greenland become independent, China could use its clout there to help further its own interests at meetings of Arctic states, in the same way that it uses its influence over Cambodia and Laos to prevent the Association of South-East Asian Nations from criticising Chinese behaviour in their neighbourhood.

Excerpts from The Arctic: A Silk Road through Ice, Economist, Apr. 14, 2018, at 37

Arctic Oil Spills are Not Preventable

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The Arctic Council Oil Spill Task Force, jointly led by the US, Norway and Russia, has finalized its work with drafting an agreement on oil pollution incidents in Arctic waters.  The agreement is to be presented and signed during the upcoming Arctic Council Ministerial meeting in Kiruna, Sweden, in May. The agreement comes as a result of a decision made by ministers of the 8 Arctic Countries at their previous meeting, i.e., in May 2011 in Nuuk, Greenland, to develop an international instrument on Arctic marine oil pollution preparedness and response.

The agreement will cover Arctic marine areas of the 8 Arctic Countries and apply to all kind of possible pollution sources, oilrigs and ships, except ships operated by a state such as naval vessels. The oil spill agreement will stipulate that each Arctic country must have a system in place that takes into account activities or places that are particularly likely to give rise to or suffer from incidents as well as areas of special ecological significance. Among other things, the agreement will contain rules for notifying about, monitoring, and assisting in responses to oil pollution incidents. It also will have stipulations regarding information exchange, the carrying out of joint exercises and training, and meetings of the parties to the agreement.

While advocating a moratorium on Arctic marine oil and gas extraction, environmentalist groups that have been following the preparation of the agreement text are welcoming it as a step forward in fighting oil spills. According to environmentalists, given that resource exploration and extraction in Arctic waters is increasing, oil spill incidents will inevitably happen. These groups also praises the fact that the agreement will recognize the role of indigenous peoples and other Arctic residents in supporting oil spill preparedness and response. Yet, at the same time, they criticize the agreement for not facilitating the use of privately owned – i.e., by oil companies – response equipment. NGOs furthermore point out that while the agreement goes a good long way to maintain and harmonize national procedures, it fails to commit its parties to actually raise their preparedness and response standards.

From the website of Arctic Council Indigenous Peoples Secretariat

The Arctic Challenger: ready for Arctic oil spills

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Shell Oil has been building and testing equipment designed for the Arctic Ocean in Puget Sound, Seattle, United States.  In September, a key test of underwater oil-spill equipment was a spectacular failure.  It forced the energy giant to postpone drilling into oil-bearing rocks beneath the Arctic Ocean until next summer. Shell and its federal regulators have been tight-lipped about the failed test.  But a freedom-of-information request reveals what happened beneath the surface of Puget Sound.

Before Shell can drill for oil in the Arctic Ocean, it needs to prove to federal officials that it can clean up a massive oil spill there. That proof hinges on a barge being built in Bellingham called the Arctic Challenger.  The barge is only one component of Shell’s plans for handling oil spills off the remote north coast of Alaska. But the Obama Administration won’t let oil drilling get under way until the 36-year-old barge and its brand new oil-spill equipment are in place,  On board the Arctic Challenger is a massive steel “containment dome.” It’s a sort of giant underwater vacuum cleaner. If efforts to cap a blown-out well don’t work, the dome can capture spewing oil and funnel it to a tanker on the surface.

The Arctic Challenger passed several US Coast Guard tests for seaworthiness in September. But it was a different story when its oil-spill containment system was put to the test in 150-foot-deep water near Anacortes, Washington.  The federal Bureau of Safety and Environmental Enforcement required the test of the oil-spill system.

According to BSEE internal emails obtained by KUOW, the containment dome test was supposed to take about a day. That estimate proved to be wildly optimistic.

•Day 1: The Arctic Challenger’s massive steel dome comes unhooked from some of the winches used to maneuver it underwater. The crew has to recover it and repair it.

•Day 2: A remote-controlled submarine gets tangled in some anchor lines. It takes divers about 24 hours to rescue the submarine.

•Day 5: The test has its worst accident. On that dead-calm Friday night, Mark Fesmire, the head of BSEE’s Alaska office, is on board the Challenger. He’s watching the underwater video feed from the remote-control submarine when, a little after midnight, the video screen suddenly fills with bubbles. The 20-foot-tall containment dome then shoots to the surface. The massive white dome “breached like a whale,” Fesmire e-mails a colleague at BSEE headquarters.

Then the dome sinks more than 120 feet. A safety buoy, basically a giant balloon, catches it before it hits bottom. About 12 hours later, the crew of the Challenger manages to get the dome back to the surface. “As bad as I thought,” Fesmire writes his BSEE colleague. “Basically the top half is crushed like a beer can.”

Representatives of Shell Oil and of BSEE declined to answer questions or allow interviews about the mishaps. In an email, Shell spokeswoman Kelly op de Weegh writes:  Our internal investigation determined the Arctic Challenger’s dome was damaged when it descended too quickly due to a faulty electrical connection, which improperly opened a valve. While safety systems ensured it did not hit the bottom, buoyancy chambers were damaged from the sudden pressure change.

Environmental groups say the Arctic Challenger’s multiple problems show that Shell isn’t prepared for an Arctic oil spill.

Excerpt, By John Ryan, Sea Trial Leaves Shell’s Arctic Oil-Spill Gear “Crushed Like A Beer Can”, Kuow.org. Nov. 30, 2012