The Obama administration is to focus its oil and gas development efforts on the Gulf of Mexico from 2012, while delaying Arctic drilling to await reaction plans in case of spills.
The five-year plan, to run from 2012, provides for 15 possible lease sales over its duration, with 12 in the Gulf of Mexico and 3 off the Alaskan coast. Lease sales in the Beaufort and Chukchi seas, above Alaska, are forecast toward the later stages of the plan until spill response has been fine-tuned.
Legislation Causes Drilling Pause
Legislative obstacles have prevented drilling in the Arctic, with companies such as Royal Dutch Shell having to hold off on exploring its leases. Shell paid the US State over $1 billion for petroleum leases in the Chukchi Sea in 2009. The company is awaiting the go-ahead to start drilling exploratory wells.
Concern over the impact of an oil spill on the Arctic’s climate has led to criticism of starting exploration in the area. Those opposed to drilling argue that an oil spill would be far more detrimental in the Arctic than in the Gulf. A greater potential for environmental harm calls for stronger systems of prevention and response than are currently in place.
The Obama administration is shying away from plans for East Coast drilling after the BP oil spill in 2010 in the Gulf of Mexico. The administration is under fire for being overly cautious in preventing drilling, resulting in job losses and taking its toll on the economy. Republicans are looking to domestic drilling to create employment and provide an alternative to foreign oil.
Offshore oil production has, however, increased from just over 445 million barrels in 2008 to 600 million barrels in 2010.
Obama’s Energy Plans Under Fire
President Barack Obama has been navigating a political minefield in his efforts to expand energy production, steered by rising oil prices and environmental risks. Prior to the BP spill, the government had been addressing the possibility of more extensive drilling off the Alaskan coast, in the eastern Gulf, and in the Atlantic.
The latest move has seen Obama put sections of the Cook Inlet, along with parts of the Chukchi and Beaufort seas back on the market, which had been opened for drilling in 2008 under President George W. Bush. The latter’s proposal covered drilling in the eastern Gulf, and off both the West and the East coast. Obama put a halt to drilling off Virginia in 2010, and prevented drilling in Bristol Bay.
The latest proposal also includes a section of the eastern Gulf off the coast of Florida, though there is a ban on the remainder of the eastern Gulf. Critics of the move point to the extreme weather climate off the Alaskan coast at present where storm conditions, including winds up to 90 mph, are expected in the Chukchi Sea.
Key Statistics – Oil & Gas Market in the Americas
- Demand for drilling products and services in the US is expected to reach almost $44 billion in 2014. (source: Freedonia)
- The Gulf of Mexico generated almost $6 billion in revenue in 2009. (source: Freedonia)
- In the 9-year period ending 2009 US oil and gas production fell at a yearly rate of almost 1.5%, and is forecast to decline at over 0.5% yearly from 2009 to 2030. (source: Datamonitor)