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May 11 2016

Tub Rings

Does anyone take baths anymore? I do when I have to (when I visit with my Aunt for instance) but I much prefer showers.

If you don’t or haven’t in a while you may have forgotten a little phenomena called ‘Tub Ring’. This is a thin ring of grime that forms where the surface of your bath water meets the walls of your tub consisting of soap scum, grease, and dirt (I really don’t like baths, I never feel clean).

Now Stockton once famously wrote that if you have the right kind of eyes you can look in the hills and see where the wave of the 60s and 70s broke. That is a metaphor, but it’s unfortunately true that on many shorelines around the world if you dig down just an inch or two you will find an oily black line that represents where petroleum products have washed up, a ‘Tub Ring’ of filth and toxicity that represents our appetite for Black Gold.

This is changing, though not fast enough. The slowdown of developed and developing economies, the supply glut that has followed the removal of sanctions from many oil producing nations like Iran, Libya, and Iraq, and the strategic decision by Saudi Arabia to use their lower cost of extraction to punish their political enemies and beggar their business rivals has in fact made some carbon reserves unprofitable. We have seen this in the Alberta Tar Sands and Keystone XL, in the shut down of many fracking operations, and now in the Arctic where as of May 1st most companies have abandoned their drilling leases to the tune of a $2.5 Billion loss.

Hardest hit of course is Shell who in addition to purchasing the leases invested somewhat more than $8 Billion in an attempt to actually drill, at least test wells.

They started in the best, most likely spots and the disappointing results (well, for their shareholders and investors) mean that it’s highly probable the entire area is a bust with no deposits recoverable at a reasonable cost.

Now in the grand scheme of things these developments don’t make Global Climate Change less certain, the tipping point is almost surely years past having been reached already.

Still, it’s kind of good news.

Big Oil Abandons $2.5 Billion in U.S. Arctic Drilling Rights
by Jennifer A Dlouhy, Bloomberg News
May 10, 2016 — 6:07 PM EDT

After plunking down more than $2.5 billion for drilling rights in U.S. Arctic waters, Royal Dutch Shell Plc, ConocoPhillips and other companies have quietly relinquished claims they once hoped would net the next big oil discovery.

The pullout comes as crude oil prices have plummeted to less than half their June 2014 levels, forcing oil companies to cut spending. For Shell and ConocoPhillips, the decision to abandon Arctic acreage was formalized just before a May 1 due date to pay the U.S. government millions of dollars in rent to keep holdings in the Chukchi Sea north of Alaska.

The U.S. Arctic is estimated to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas, but energy companies have struggled to tap resources buried below icy waters at the top of the globe.

Shell last year ended a nearly $8 billion, mishap-marred quest for Arctic crude after disappointing results from a test well in the Chukchi Sea. Shell decided the risk is not worth it for now, and other companies have likely come to the same conclusion, said Peter Kiernan, the lead energy analyst at The Economist Intelligence Unit.

“Arctic exploration has been put back several years, given the low oil price environment, the significant cost involved in exploration and the environmental risks that it entails,” he said.

All told, companies have relinquished 2.2 million acres of drilling rights in the Chukchi Sea — nearly 80 percent of the leases they bought from the U.S. government in a 2008 auction. Oil companies spent more than $2.6 billion snapping up 2.8 million acres in the Chukchi Sea during that sale, on top of previous purchases in the Beaufort Sea.

Shell relinquished 274 Chukchi leases and others in the neighboring Beaufort Sea. In doing so, the company forfeits what it paid the U.S government for the rights to drill in those tracts — and the millions of dollars it spent on annual rent since then.

Shell is holding on to one parcel in the Chukchi Sea: the tract it drilled last year. Smith said Shell is maintaining that lone lease — at a potential cost of $132,456 over the next four years — because there is value in the data the company gathered during its 2015 exploratory drilling. Companies generally have to give the U.S. government the geological information they glean from oil and gas development in federal waters, but they can get an extra two to 10 years to turn over that data as long as they still hold the territory.

Now, only 535,586 acres remain locked up in the Chukchi Sea. Besides Shell’s one lease there, the tracts are in the hands of just one oil producer: Spain’s Repsol SA.

1 comment

  1. ek hornbeck

    Vent Hole

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