|A BP oil platform in the North Sea. Photo credit: Reuters / Andy Buchanan / Pool.|
By Anders Lorenzen
Greenpeace, who in the last few years have campaigned against Arctic oil drilling, could be given an unlikely helping hand by market forces.
A recent drop in oil prices which has fallen to below $80 a barrel will make many oil projects unprofitable, this could deter oil companies pursuing risky oil exploits such as projects in the Arctic.
Greenpeace, has in the last few years, led an ambitious campaign against the oil major Shell, who wants to drill in the Alaskan Arctic and have targeted companies like Waitrose and Lego, who have partnerships with them. Shell has so far been forced to abandon their Arctic plans due severe weather and technical difficulties.
As recently as June this year oil prices reached a 2014 high of $113 per barrel due to the escalation of conflicts and the insurgents movements by the Islamic State group (IS) who had taken over an Iraqi oil refinery. But despite conflicts still being a serious threat to oil supply; it has not been seen as a serious enough risk to keep oil prices high.
According to Reuters, recent discoveries of over a billion barrels worth of oil could remain undeveloped at least for the foreseeable future.
In what would please environmentalists, exploration in Greenland could be called off, discoveries in the Norwegian Arctic could stay dormant, and even mature oil fields in the North Sea could face early closure as oil companies, due to their loss in revenue from the drop in oil prices, are looking to cut their spending by one fifth.
One project that is vulnerable to cancellation is Statoil’s Johan Castberg, which is the biggest Arctic find in Norway. With up to 600 million barrels of oil, this has already been delayed a year and would only break with an oil price between $80 – $85 per barrel.
But other projects are more vulnerable, OMV’s Arctic Wisting discovery in the Barents Sea, where 150 million barrels of oil is estimated to be recoverable, would need an oil price of $110 per barrel to break even.
South of the Arctic circle another Statoil project that would extend the field Snorre by adding a new platform is at risk. The $4.5 billion project was in doubt when the oil price had fallen to $100 per barrel.
In the British North Sea several mature fields are at risk from the low oil price as the costs are already increasing for maintenance work at the older platforms, this would make it much harder to attract new investments into these fields and will increase the risks of early closures.
Investors will be concerned at the drop in oil prices and will be challenged by more and more of their customers, who will question the financial safety in continuing the high level investment in oil majors.
Environmentalists will argue that let alone what it mean for climate change, it is a risky business to continue to invest in a sector rapidly losing market value and peoples savings and pension funds could be at risk.
Sub edited by Charlotte Paton