US Arctic oil may freeze with new delays

Significance

The Department of the Interior on May 11 gave Shell conditional approval to drill in Alaska's Chukchi Sea. Most supermajor oil companies have cut capital expenditure in the wake of the recent fall in oil prices, but Shell views developing Arctic resources as essential to ensuring energy security in future decades. The company expects to spend 1 billion dollars on Arctic exploration this year.

Impacts

• The development of Arctic offshore oil and gas fields is not currently economic, nor is there unmet demand.
• However, this project will provide Shell with the opportunity to refine exploration and production capacity.
• This will set the groundwork for future expansions in these risky geographies.
• An environmental accident would cause massive reputation harm, and curtail further exploratory drilling in the region.