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  • Obama stops Arctic oil drilling – for now

    The Obama administration has blocked any new drilling permits for oil in the Arctic for the next two years, and refused requests to extend existing drilling permits. The decision follows Shell’s abandonment of Arctic drilling in September and could signal the end of the threat of oil exploration in the delicate Arctic ecosystem.


    The possibility of oil reserves in the Arctic being brought to the surface has alarmed the environmental movement, especially as the US Geological Survey estimated that the Arctic holds around 13% of the world’s undiscovered oil.

    Fears that the fight against climate change could be made unwinnable, if widespread drilling was allowed in the Arctic, increased when Shell undertook exploratory drilling in 2012 and again this year. But in September the Dutch-based company admitted it had found very little oil for its $7 billion (€6.4 billion) investment, and for this reason and the strength of protests from environmental groups, it abandoned its Arctic project.

    The Obama administration’s decision, three weeks later, to cancel auctions of drilling rights for the next two years means no new drilling will happen before 2020 at the earliest. With the market for Arctic oil exploration increasingly uncertain, two companies (Shell and Statoil) asked for their 10-year leases to be suspended, effectively extending them beyond 2020, but the requests have been rejected.

    Several oil companies still hold drilling licences for the Chukchi Sea, but only Shell has carried out any exploratory drilling. It had several accidents in inhospitable conditions and found very little oil. It also admitted it was surprised at the popular opposition to its drilling.

    Environmental groups welcomed the decisions, but few were under any illusions that the administration had acted for pragmatic reasons. Only one oil company had expressed any interest in further drilling, so the administration had little option other than cancelling the auctions.

    The reasons cited for the lack of interest in Arctic drilling were an uncertain regulatory environment and the current low price of oil. The regulatory environment could change in just over a year when Barack Obama’s term as president ends in January 2017, so some observers believe the oil companies are waiting for a more oil-friendly White House.

    In the addition to the US, Russia, Canada, Norway, Greenland, and Iceland control parts of the Arctic and, like Alaska in the US, Russia and Norway are economically dependent on oil and gas. Both have drilling projects ongoing there and the territory will become more attractive should oil prices increase.