Norway’s Statoil exits Alaska oil exploration

OREANDA-NEWS. November 19, 2015. Norway's state-controlled Statoil is exiting Alaska as the challenges of exploration and a plunge in crude prices prompted the producer to focus on areas that offer better returns.

Statoil's exit follows a similar move by Shell which in September decided to cut its losses in the US arctic ocean, following disappointing results from an exploration well in the Chukchi sea. Since 2007 Shell has spent \\$7bn searching for oil offshore Alaska but ran into many problems with equipment, weather, regulatory obstacles and strong opposition from environmental groups.

Statoil will exit its 16 operated leases and its stake in 50 leases, operated by ConocoPhillips, all in the Chukchi sea. The leases were awarded in 2008 and expire in 2020.

"Since 2008 we have worked to progress our options in Alaska," executive vice president for exploration Tim Dodson said in a statement. "Solid work has been carried out, but given the current outlook we could not support continued efforts to mature these opportunities."

Statoil last month reported its fourth quarterly loss since oil prices started falling in mid-2014 citing lower oil prices, but Senator Lisa Murkowski, R-Alaska, blamed the Obama administration for Statoil's decision to pull out of Alaska.

"Low oil prices may have contributed to Statoil's decision, but the real project killer was this administration's refusal to grant lease extensions," Murkowski said.

Shell and Statoil had asked the US Interior Department's Bureau of Safety and Environmental Enforcement (BSEE) to extend the leases beyond their primary, 10-year terms. But BSEE denied those requests last month, meaning leases in the Beaufort will expire in 2017 and in the Chukchi in 2020.

Shell had complained that it had been prevented from exploring on the leases because of regulatory restrictions and delays sparked by court and administrative challenges, as well as a lack of arctic-ready equipment and uncertainties associated with arctic rules. Statoil cited recurring ice conditions and a number of other issues, including regulatory restrictions.

The Interior Department last month also cancelled two planned oil and gas lease sales for the waters off northern Alaska because of a lack of producer interest. In the wake of Shell's disappointing exploration efforts in the Chukchi sea, Interior's Bureau of Ocean Energy Management cancelled plans to hold Lease Sale 237 in the Chukchi in 2016 and Lease Sale 242 in the Beaufort Sea in 2017.

The administration's "imposition of a complicated, drawn-out, and ever-changing regulatory process; and its cancellation of future lease sales that have stifled energy production in Alaska," Murkowski said.