Uncertainty Mounts as Shell Departs North Slope

Uncertainty Mounts as Shell Departs North Slope

Alaska and its oil and gas interests came under fire in April when the Biden administration announced the shocking news to remove 13 million acres from the National Petroleum Reserve. Although the federal government originally appropriated twenty-three acres of Alaska wilderness for the project that has been a staple to the state’s economy, now a trickle down effect seems apparent. The latest blow comes in the form of Shell’s decision to abandon opportunities in the area because of governmental interference in conjunction with potential lawsuits and protest headaches.

Although the company’s Alaskan opportunities appeared highly lucrative, Shell released a basket of oil leases located in the Western Harrison Bay area of the North Slope. This follows a previous decision the firm levied in 2016 to relinquish feral offshore leases. Once a major player in Alaska, Shell’s footprint is quickly fading to a distant memory.

“As a former oil company guy for over 40 years, I have sympathy for those guys in Houston, because I knew it probably drove them crazy that their upper management was so against it – and so scared of the European climate cultists,” said Tom McKay, Alaska’s Republican representative.

When the West Harrison Bay project first started to fall victim to pressure and opposition, McKay convened a legislative hearing. He feels the future of oil and gas in Alaska could be corrected and revealed in an interview the possibility existed for other companies, like Narwhal LLC, interested in the region could still seek out leases at the state auction level and capitalize on drilling opportunities.

Although Narwhal has displayed interest with purchasing acreage near the West Harrison Bay sector, but the companies might not have the financial depth needed to ensure success. Conducting oil and gas business in the North Slope demands challenging logistical solutions and specialized personnel to endure the elements. Combined with other critical components, drilling campaigns can realistically exceed $100 million.

No matter the costs, strategies, or any other contributing factors, Shell’s departure erodes confidence and threatens the state’s economy. While oil and gas makes up the majority of its tax base, Alaska’s employment depends on the multiple services that make up the industry. BP’s 2020 departure from Alaska’s frontier levied its own impact on the economy, so the fear is certainly real.

“A lot of stuff is coming together that suggests decreased investment in remote, Arctic areas for oil and gas. Alaska leadership has to understand this stuff is happening,” said Mark Meyers, a former natural resources commissioner to Alaska. “Worldwide events are overcoming us faster than we can manage it. Shell’s response should not be seen as a one-off.”

While the oil and gas industry overall has remained resilience throughout its lifespan, Alaska’s contribution still carries the same grit. North Slope activity remains for now with two new oil projects under construction with the potential to boost the state’s total production by approximately 50 percent. The future script can still be edited as it is not set in stone. While an increase in production will potentially generate new business opportunities, ConocoPhillips and its Willow project will boost the economy and activity on the North Slope.

Opportunity in Alaska is not exclusive to the oil and gas industry. While more states and companies embrace the energy transition, the North Slope is following the same path. McKay recently passed a bill to allow companies to sequester carbon pollution underground. The potential to expand opportunities provides Alaska the ability to sustain the oil and gas industry well into the future. Time will reveal which companies will play a key role in Alaska’s oil and gas activity well into the future.

Author Profile
Nick Vaccaro
Freelance Writer and Photographer

Nick Vaccaro is a freelance writer and photographer. In addition to providing technical writing services, he is an HSE consultant in the oil and gas industry with twelve years of experience. Vaccaro also contributes to SHALE Oil and Gas Business Magazine, American Oil and Gas Investor, Oil and Gas Investor, Energies Magazine and Louisiana Sportsman Magazine. He has a BA in photojournalism from Loyola University and resides in the New Orleans area. Vaccaro can be reached at 985-966-0957 or nav@vaccarogroupllc.com

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