Industry associations respond to Arctic offshore lease sale cancellations

Offshore staff

WASHINGTON, D.C. – The American Petroleum Institute (API) and the National Ocean Industries Association (NOIA) have responded to the US Department of the Interior’s recent decisions to cancel 2016 and 2017 Arctic lease sales and to deny Arctic offshore development extension requests.

On Friday, Oct. 16, the DOI canceled the lease sales, which were scheduled under the current five-year offshore oil and gas leasing program for 2012-2017, because of the current market conditions and low industry interest.

Chukchi Sea Lease Sale 237 was scheduled for 2016, and Beaufort Sea Lease Sale 242 was scheduled for the first half of 2017.

That same day, the Bureau of Safety and Environmental Enforcement denied requests from Shell and Statoil for lease suspensions that would have allowed the companies to retain the leases beyond their primary terms of 10 years. The leases will expire in 2017 (Beaufort) and 2020 (Chukchi).

The API Director of Upstream Erik Milito said: “Investment decisions have been directly thwarted by the policy decisions of the administration related to Alaskan outer continental shelf development, and lease extensions are clearly justified under the circumstances.” 

Milito said it was “not surprising” that the Interior canceled the remaining lease sales, because there was an absence of nominations. But he observed that “it is the significant regulatory uncertainty that has created the reluctance on the part of our industry.”

In late September, Shell announced that the Burger J exploration well in the Chukchi Sea found insufficient indications of oil and gas. Burger J was drilled 150 mi (241 km) from Barrow in around 150 ft (45.7 m) of water and to a TD of 6,800 ft (2,072 m).

The company also said it would not pursue further exploration offshore Alaska “for the foreseeable future,” in light of the well results, the high costs associated with the project, and what the company termed “the challenging and unpredictable federal regulatory environment in offshore Alaska.”

NOIA President Randall Luthi described the DOI’s decisions as “extremely disappointing and short-sighted. It is clear that this administration used Shell’s recent dry hole experience as an excuse for a political exit from the Alaska offshore area,” he added.

Luthi remarked that the Shell outcome “should not have resulted in the cancellation of these two sales, which have been scheduled since 2012.” Shell proved that exploration and drilling can be done safely in the Arctic, he noted.

10/19/2015

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