By Gregory DL Morris
Sept. 21 was the official last day of summer, but project delays and early ice had already closed the window for oil-and-gas development in the High Arctic for Royal Dutch Shell and other oil-and-gas drilling companies. With the drill rigs and response ships in their winter berths, the debate over drilling in the Far North shifted indoors to boardrooms, court rooms and even the British Parliament.
That same day, in a stark reversal of roles, Shell filed a suit against environmental group Greenpeace in a Dutch court. Essentially Shell is seeking a restraining order to keep protesters at least 1,500 feet from any company structure or property. If Shell is successful, Greenpeace is expected to appeal. Shell has invested about $4.5 billion to develop offshore fields north of Alaska.
Separately, the Environment Audit Committee of the House of Commons called for a moratorium on all Arctic drilling and development pending further environmental reviews are completed and further protections put in place.
Those protections include insurance, and underwriters are hopeful of building a new market in some of the most inhospitable lands and seas on the planet. Most of the global majors and national oil companies that have been the pioneers in the High Arctic -- including Shell, BP, Statoil, Gazprom -- are largely self-inured, at least for the first few tiers of their tower. But carriers are building relationships with them as well as with the independent oil-and-gas companies moving into the region.
"There is definitely a commercial market for the Arctic region in general, even the offshore," says Pete Connors, global offshore energy leader for Allianz. "Gasprom and Lukoil are both clients of ours. This market is going to grow, but slowly. It is still seasonal: you have to shut down and vacate at the end of summer and pick it up in the spring."
Connors notes that there is good competition and sufficient capacity in the offshore market worldwide, with the possible exception of some of the megaprojects of $5 billion and beyond, such as are being planned off the coast of Australia. But for the Arctic the limits on commercial business is demand and not supply. "All the relatively easy plays have been made. The challenge for the risk-transfer market is to track and understand the new plays."
That said, he notes that offshore coverage does not differ very much from the Gulf of Mexico to the North Sea to the Arctic. "The major exposures are the same, fire and blowout. There is ice in the north and named windstorms in the south. Floating platforms can be blown or carried off location."
In February 2011 the Maersk Gryphon, a floating oil storage vessel in the North Sea was torn from its anchors by a storm. Helicopters rescued the crew, and tugs wrangled the vessel before it was seriously damaged, but the incident was estimated at a $1 billion loss.
October 1, 2012
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