US industry group pushes for arctic lease changes

OREANDA-NEWS. The US National Petroleum Council (NPC) is urging policy makers to rethink the leasing terms governing arctic oil and gas exploration.

With Russia, Norway, Canada and Greenland all keen to test the waters at the top of the world, the industry advisory group told the US Department of Energy in a new report today that US policy makers must help facilitate oil and gas exploration in the arctic to help offset an anticipated decline in US oil production sometime after 2020.

The NPC warns that the long lead times needed to develop projects in the arctic mean that exploration off the coast of Alaska must ramp up this decade if new sources of oil are to become available in the 2030s and 2040s.

ExxonMobil chief executive Rex Tillerson said the industry views the resource potential in the US arctic "as attractive if not more attractive than arctic resource potential in other nations."

But with the practical drilling season in the arctic sometimes as little as 40-60 days, the NPC called on US regulators to increase lease terms, calling today's 10-year lease duration "inadequate".

Shell upstream Americas director Marvin Odum said "it makes sense to have longer lease terms. The season is short. The regulatory process is more onerous. It is going to take more time and that should be recognized, at least."

Tillerson pointed to a US leasing system that is development-based. To retain a lease, an operator must be able to move into commercial development within 10 years. Canada, Greenland, Norway and Russia all offer exploration-based leasing and licensing systems, which grant regulators extra time to determine technical or commercial viability.

The Northstar field, located six miles northwest of Prudhoe Bay, is the only US offshore producing field in the arctic offshore. Production began in 2001, 22 years after the leases were first acquired. That is twice the lead time for Shell's deepwater Mars project and BP's Atlantis project in the US Gulf of Mexico.