Arctic Oil: BP May Be Out of Greenland, but It's Not Giving Up Yet
BP, the UK company known for breaking into new oil and gas frontiers, is no longer vying for an exploration license to drill off the shore of Greenland -- the first indication that the Gulf oil spill has impacted its business in other parts of the world.
But that doesn't mean ambitions to drill in the Arctic have quieted. Cairn Energy, a UK rival of BP, has two offshore rigs operating in the previously undrilled Baffin Bay Basin. The company announced this week that it struck gas in the Arctic, a discovery that will fuel development in the region.
There's always been a keen interest in the Arctic, specifically offshore Alaska, where ConocoPhillips and Shell have been trying to expand for several years. But until Cairn's successful hydrocarbon strike, the prospect of producing oil and gas offshore Greenland was more hopeful than fruitful. A 2008 US Geological Survey report said the area offshore Greenland could hold more than 50 billion barrels of oil equivalent. But until now, companies' exploration efforts have come up empty handed. It wasn't until warming temperatures opened up more of the Arctic that companies began to return to the area.
Cairn is hoping to change that. It's already said, as noted in a WSJ report, that it's prepared to spend $1 billion over three years to search for oil offshore Greenland.
BP's exit from the bidding round was well-timed. Cairn Energy's drilling activity offshore Greenland has prompted environmentalist group Greenpeace to try and confront its drilling ship, albeit unsuccessfully. Imagine the outcry had BP been awarded an exploration license. The company's presence there would've sparked protests and likely threatened the government's plan to develop offshore oil and gas there.
BP's departure there has been couched as a decision made within the company. But I have to wonder whether the Greenland's government pushed BP out. It's not as if BP is backing away from any of its other offshore exploration plans.
Exxon (XOM), Imperial Oil, a Canadian subsidiary of Exxon, and BP formed a joint venture last month to explore for oil and gas in Canada's Beaufort Sea, which is in the Arctic. Canada's National Energy Board is reportedly reviewing offhsore drilling operations because of the BP spill in the Gulf, and the project is still subject to regulatory approval. If BP's plans are scuttled here, the company may find its offshore ambitions considerably crippled.
Photo from Cairn Energy
Related: