IEA sees high risk in arctic oil

LONDON, Sept. 18 (UPI) -- The incoming executive director of the International Energy Agency said drilling for oil in arctic waters may be geologically and economically prohibitive.

"I believe that arctic oil is not for today, and not for tomorrow -- maybe for the day after tomorrow," Fatih Birol told The Guardian newspaper in London. "It's geologically difficult, technologically difficult, lots of environmental challenges, and the cost of production is very, very high, especially if you look at the current oil price levels."

The U.S. Bureau of Safety and Environmental Enforcement in August awarded Shell with one permit to start drilling an exploration well into oil-bearing zones in the Burger prospect in the arctic waters off the coast of Alaska.

A federal study of the Burger prospect from 2004 described it as likely the largest reserve pool of its kind off the Alaskan coast.

Alaskan oil and natural gas production is in decline in part because legacy fields are approaching maturation. Amid early 2015 opposition to Shell's regional program, Alaska Gov. Bill Walker said his state is facing a $3.5 billion deficit.

In total, the state government estimates the arctic waters hold as much as 24 billion barrels of oil and 104 trillion cubic feet of natural gas.

Shell's early efforts off the coast of Alaska were plagued by equipment issues. Shell in July discovered a small breach in the hull of MV Fennica, chartered to carry the safety equipment to the Chukchi Sea. A drill ship slated for offshore Alaska, Noble Discoverer, suffered a series of setbacks during a 2012 campaign off the coast of Alaska.

The Dutch supermajor has already committed about $7 billion to the program.

Birol said political and business leaders need to all of the combined risks before moving forward with frontier exploration campaigns.

"I think the companies should look at all these risks combined," he told The Guardian. "It is up to them to make or lose money."