Arctic Oil Drilling Back in the Spotlight

Published Aug 25, 2006 12:01 AM by The Maritime Executive

Stalled legislation which would allow drilling in the Arctic National Wildlife Refuge (ANWR) could receive a much-needed jump start when Congress returns in September. The shutdown of oil major BP's Alaska drilling operations earlier this month was not only a surprise to industry and consumers alike, but also underscored fragile condition of domestic crude oil supplies. Supporters of ANWR oil drilling have seized upon the near-catastrophic event to reenergize the push in Congress to expand domestic petroleum exploration and production.

Two other domestic drilling bills are also scheduled for negotiations between the House and Senate. The bills, both calling for expansion of drilling and exploration on the U.S. Outer Continental Shelf, will need to be reconciled in committee when Congress returns from recess.

In Alaska, production from Prudhoe Bay has peaked and is slowly declining. On the Gulf Coast, Cuba with the aid of other countries, is beginning to explore for oil dangerously close to the Florida coastline. American firms would like to join in, but so far, the outer continental shelf remains off limits. There is hope. The House Resources Committee is expected to hold hearings on proposals to open 1.5 million coastal acres - an area just the size of Dulles Airport - of the 19 million-acre refuge to limited drilling.

U.S. Government estimates, backed by American Petroleum Institute studies, say that there is probably more than 10 billion barrels of oil that can be retrieved in ANWR. The more than 15 billion barrels already pumped out of Prudhoe Bay has already exceeded by a wide margin, the original estimates of reserves there. Proponents of drilling dismiss environmentalist concerns over the potential desecration of the fragile area by saying that new and modern drilling techniques will leave only 5% of the footprint that the original drilling at Prudhoe Bay created. Beyond this, the pipeline needed to carry it to Valdez already exists.

Already, the Valdez crude export terminal is recording a decline in tanker traffic. The same terminal which normally receives about a tanker per day is now expecting only four this coming week. Normally, the Trans-Alaska Pipeline System has a throughput of 800,000 bpd, but the drop-off to 600,000 bpd is a direct result of reduced shipments in light of the problems with Prudhoe Bay oil production. It could have been worse, had BP not been able to keep the western side of the Prudhoe Bay open while repairs to pipelines were being started.