Posted by: coastlinesproject | January 20, 2015

Greenland, “Big Oil; The Beginning of the End?”

Big Oil;

The Beginning of the End?

 

 

Premier Aleqa Hammond put down the phone. How was she going to explain this to her constituents? The CEO of Statoil had just informed her that they were handing back their licenses to explore for oil off the west coast of Greenland. Greenlanders had been counting on that offshore oil to supply income so they could afford to seek independence from Denmark. Aleqa had been promising her Inuit constituents that Greenland would become the first nation of indigenous people in her lifetime.

 

But the same thing was happening all over the world. Royal Dutch Shell had just abandoned plans to build a $6.5 billion petrochemical plant in Qatar and UK’s Premium Oil had announced it was delaying a decision on whether to go ahead with Project Sea Lion, its proposed deepsea drilling operation off the Falkland Islands.

 

The entire industry was shattering; workers were being laid off, supplies cancelled, drill ships were lying idle in harbors. Oil companies were pulling out of Africa, the Arctic, the deep sea off Brazil.

 

The big story at the end of 2014 had been that the price of oil had plummeted $46 a barrel, half of what it had sold for in June. But the big story at the beginning of 2015 was the rapid collapse of the oil industry itself. Even Lord Browne, the former head of BP, said that oil companies were in denial about climate change because, “They could not acknowledge an existential threat to their business.”

 

The majors used to pride themselves on being bigger, more powerful and far thinking than any single country. They had their own ships, their own banks, guards and intelligence units. If all else failed they had always been able to rely on the armed forces of the United States, Great Britain and Russia to protect their monopolies in Iran, Iraq and Saudi Arabia.

 

They harkened back to the days of John D. Rockefeller and the head of Occidental Oil, Armand Hammer who was the go between between 5 General Secretaries of the Soviet Union and 7 presidents of the United States. And of course Exxon and BP were lobbying to let Vladimir Putin off the hook. Who was going to let a small thing like the invasion of Crimea get in the way of drilling for oil in the ice free Arctic Ocean?

 

The companies had snickered at environmentalists’ attempts to gets schools and churches to divest themselves of oil stocks. They had sneered at frackers penny ante attempts to get residual oil out of old worn out wells.

 

It was only when OPEC decided not to cut back on production that they started to realize that they could be caught holding the bag of stranded assets, over a billion dollars worth of oil in fields that could only be profitably drilled if the price of oil was over a hundred dollars.

 

Big Oil simply couldn’t compete if oil was selling below $50 a barrel and demand was dropping as countries started limiting carbon emissions and the cost of renewables was plummeting.

And hard-nosed investors were starting to realize the problem of stranded assets was going simply disappear. Over $91 billion dollars of their investments were at risk.

 

 

Everyone knew that oil would eventually rebound, but the big oilmen knew that the damn frackers could get back into the game faster than they ever could. The majors had been running their companies like Captain Ahab obsessed with capturing Moby Dick. They had built bigger and more expensive drill ships to ply further afield for deeper more expensive oil.

 

They had ignored the threat of frackers like 19th century whalers had ignored Edwin Drake, the faux Colonel who had secured title over land in Hicksville Pennsylvania and was busy drilling for rock oil and selling it out of discarded whiskey barrels for far less than a barrel of whale oil.

 

The writing was on the wall, but like their 18th century counterparts the modern oilmen couldn’t believe what they were reading.

 

####

 

William Sargent is the author of 20 books on science and the environment. His latest book, Islands in the Storm, is about Plum Island. It is available in local bookstores and through Amazon.com and at www.strawberryhillpress.com. See tabs at the top of this page.

 

 

 

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