U.S. approves Arctic oil drilling off Alaska

Thursday, November 30, 2017

The U.S. has issued a final permit allowing Eni US Operating Co. to drill for oil and gas in Arctic waters. The November 28 approval by the Bureau of Ocean Energy Management's Bureau of Safety and Environmental Enforcement of Eni's application for a drilling permit represents the first approval of U.S. Outer Continental Shelf oil exploration in the Arctic in over 2 years.

Eni U.S. Operating Co. Inc. had applied for the permit earlier this year, and federal regulators gave it conditional approval in July 2017. With the final approval now issued, regulators expect Eni to begin drilling an exploratory well from a man-made island in the Beaufort Sea as early as December 2017. While the drillsite would be located within State of Alaska waters, the company's "extended reach drilling" is expected to target a formation in federal waters over the Outer Continental Shelf.

Beyond Eni's approved exploration plans, some other companies have expressed interest in increasing production of oil and gas from federal and state lands in Alaska such as the Alaska National Wildlife Refuge as well as nearby Arctic waters. The area is considered likely to hold producible hydrocarbons.

But previous efforts to explore for oil in the U.S. Arctic have met with challenges. In 2008, Royal Dutch Shell spent over $2 billion to acquire federal leases beneath the Chukchi Sea in the U.S. Artic; after unsuccessful efforts in 2012 and 2015 to conduct drilling on the prospects which were challenged by ice and technical problems, in 2016 Shell walked away from all but one of its federal offshore leases in the Chukchi. While the Trump administration may be more supportive of U.S. Arctic oil and gas production than under President Obama, project economics and environmental concerns remain challenging - let alone the rigors of the Arctic marine environment.

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