Energy Giant Warns Against Oil Drilling in the Arctic

On 25 September 2012, it was widely reported that the France-based international oil and gas company Total SA (NYSE:TOT) said that energy companies should not drill for crude oil in Arctic waters, thus becoming the first major oil company to publicly speak out against offshore oil exploration in the environmentally sensitive Arctic region.

The FT quotes Total’s CEO Christophe de Margerie who said in an interview that the risk of an oil spill in such an environmentally sensitive area was simply too high. *“Oil on Greenland would be a disaster”*, he pointed out, and added that he was concerned about the damage a potential leak could do to the image of the company. Yet, Mr de Margerie noted that he was not opposed to Arctic exploration in general, with Total having a number of natural gas operations in the region. He, however, pointed out that gas leaks were easier to handle than oil spills.

Total is hardly the only energy company with Arctic ventures. Royal Dutch Shell (LON:RDSA) for instance recently had to postpone an attempt to drill into oil-bearing rock off the Alaskan coast. Other energy companies such as the Norwegian Statoil (NYSE:STO) and the Texas-based Exxon Mobile (NYSE:XOM) also intend to explore for oil in Russia’s Arctic waters.

As noted in the FT article, in 2008, a study by the US Geological Survey indicated that the Arctic contained just over a fifth of the world’s undiscovered, recoverable oil and gas resources. In addition, global warming and the melting of the ice cap have made the area more accessible, prompting major oil companies to focus on Arctic projects. Yet, the rising temperatures facilitating the access to the Arctic’s resources easier are also causing environmental changes which in turn put pressure on the region’s ecosystem.

!m[](/uploads/story/472/thumbs/pic1_inline.png)Total’s statement comes after at the end of August, several government monitoring organisations, including the US-based National Snow and Ice Data Centre (NSIDC) and the Japanese Aerospace Exploration Agency said the Arctic sea ice has hit its lowest extent ever recorded, as reported by The Guardian at the time.

Mr de Margerie’s stance on Arctic drilling was naturally welcomed by environmental groups, which are opposed to the presence of energy companies in the region. “The rest of the oil industry should heed his warning”, pointed out Ben Ayliffe, head of Greenpeace’s Arctic campaign, as quoted by the FT. *“Given the risks, companies shouldn’t be touching the Arctic with a barge pole”.*
Bloomberg reports that Greenpeace has campaigned against Arctic drilling by Royal Dutch Shell in Alaska, Cairn Energy (LON:CNE) in Greenland and Gazprom (MCX:GAZP) in Russia. In addition to environmental organisations, politicians including a group of UK legislators and ecologists have also urged a ban on oil and gas exploration to protect the region from the risk of spills. BusinessGreen recently wrote that British MPs were calling on companies such as Royal Dutch Shell to halt “reckless” oil as well as gas drilling in the Arctic until stronger safety measures were put in place.

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