Obama Bans Arctic, Atlantic Offshore Drilling

After establishing a partnership in March, US President Barack Obama and Canadian Prime Minister Justin Trudeau coordinated on Dec. 20, to launch a drilling ban in Arctic waters.

The decision cited the “important, irreplaceable values” of Arctic waters to native cultures, wildlife, and scientific research; “the vulnerability of these ecosystems to an oil spill; and the unique logistical, operational, safety, and scientific challenges and risks of oil extraction and spill response in Arctic waters.”

According to a statement released by the White House, the two North American leaders moved to designate the majority of US waters in the Chukchi and Beaufort seas as indefinitely off limits to offshore oil and gas leasing.

Canada will designate all Arctic Canadian waters as indefinitely off limits to future offshore Arctic oil and gas licensing, to be reviewed every five years through a climate and marine science-based life-cycle assessment, the statement continued.

US Secretary of the Interior Sally Jewell released a statement to applaud the announcement.

“The president’s bold action recognizes the vulnerable marine environments in the Arctic and Atlantic oceans, their critical and irreplaceable ecological value, as well as the unique role that commercial fishing and subsistence use plays in the regions’ economies and cultures,” Jewell said.

Jewell said that the withdrawal areas announced today encompass 3.8 million acres in the north and mid-Atlantic Ocean off the east coast and 115 million acres in the US Arctic Ocean.

“Including previous presidential withdrawals, today’s action protects nearly 125 million acres in the offshore Arctic from future oil and gas activity,” Jewell said, while noting that the withdrawal does not restrict other uses of these federal waters on the outer continental shelf.

The withdrawal also does not affect a nearshore area of the Beaufort Sea, totaling about 2.8 million acres, that has high oil and gas potential and is adjacent to existing state oil and gas activity and infrastructure.

While there are significant concerns about oil and gas activity occurring in this area, it will be subject to additional evaluation and study to determine if new leasing could be appropriate at some point in the future. Interior’s five-year offshore leasing program for 2017-2022 does not include lease sales in this area or in the withdrawn areas.

While Jewell was pleased, other industry bodies did not express such positive reactions.

“The administration has always justified a ban on Arctic development because of an alleged lack of local support or industry interest,” said a spokesperson from The Arctic Energy Center. “The Arctic Energy Center’s research categorically shows that that is simply not true, with almost three quarters of Native respondents supporting offshore energy.

“Taken with last week’s news that sales of Beaufort Sea and North Slope leases generated $18 million, it is hard to avoid the conclusion that the Obama administration is playing politics with the future of Alaska.”

In addition, some news outlets have been reporting that by invoking the Outer Continental Shelf Land Act, the action cannot be reversed by the incoming Trump administration, which also spurred some reaction across the industry.

“President Obama’s short sighted, unilateral withdrawal of Atlantic and Arctic Ocean areas from future oil and gas leasing not only risks the long-term energy security and energy leadership position of the United States, it violates the letter and spirit of the law,” said National Ocean Industries Association President Randall Luthi.

“Such an expansive withdrawal, particularly when argued as being ’permanent’, is clearly inconsistent with the Outer Continental Shelf Land Act’s steadfast declaration that ‘... the outer continental shelf is a vital national resource reserve held by the federal government for the public, which should be made available for expeditious and orderly development, subject to environmental safeguards, in a manner which is consistent with the maintenance of competition and other national needs ...’”

Luthi also continued by saying that Obama “has benched the United States, dismissing his own advisors who have argued that energy development, particularly in the Arctic, is imperative to our national security.”

Similarly, US Chamber of Commerce Energy Institute’s Christopher Guith said that the ban is not binding for the next administration and “must be undone in order to work towards a commonsense offshore energy plan.”

Crude Exports Resume at Libya's Es Sider

An oil tanker docked at the east Libyan port of Es Sider to load the first cargo of crude since the terminal reopened following a two-year closure, port officials said.

Es Sider, Libya's biggest export terminal, had been shut due to a blockade by a military faction since 2014. It reopened in mid-September, but repairs were needed before tankers could load at the port, and its capacity remains far below its pre-conflict level of 350,000 barrels per day (bpd).

Es Sider is one of four ports seized in September by forces loyal to east Libyan commander Khalifa Haftar, which allowed Libya's National Oil Corporation (NOC) to reopen them, doubling national production to about 600,000 barrels per day (bpd).

Libya's oil production has been slashed by political disputes and armed conflict in recent years, and is one of two members of the Organization of the Petroleum Exporting Countries (OPEC) that is not bound by the bloc's pledge to cut oil production by about 1.2 billion bpd during the first half of 2017.

The North African country's output remains well below the more than 1.6 million bpd it was producing before a 2011 uprising.

Es Sider was badly damaged in several rounds of fighting and by attacks by Daesh. In recent weeks the NOC has been loading the Es Sider crude grade, produced by joint venture Waha Oil Co, from the neighbouring port of Ras Lanuf.

The return of oil tankers to Es Sider comes after claims of a deal to reopen a pipeline leading from two major fields in western Libya last week failed to result in any restart of production.

The NOC has not commented officially on the claims, which came after long negotiations to end a two-year blockade. It is unclear if factions around the western town of Rayana are prepared to allow oil to flow through the pipeline, or whether armed groups present at the southern Sharara and El Feel fields will allow pumping to resume.

Libya Expects 270,000 b/d Boost

Libya's National Oil Corporation said pipelines leading from the western fields of Sharara and El Feel had been reopened after a two-year blockade, paving the way for a major boost to production.

The NOC said in a statement that it expected to add 175,000 barrels per day (bpd) to national production in the next month, and 270,000 bpd over the next three months.

Libya's oil production has been hit by conflict and political disputes over the past three years. National output recently doubled to 600,000 bpd but remains far below the more than 1.6 million bpd the OPEC member was producing before the 2011 uprising.

Any speedy recovery in Libyan output could slow OPEC efforts to rebalance the market and ease a global supply glut. Libya and Nigeria were exempted from a recent OPEC pledge to cut oil production by around 1.8 million bpd.

A rise of 270,000 bpd in Libya's crude production would more than outweigh production cuts that Iraq and Algeria collectively pledged.

However, Libyan production remains vulnerable to the North African country's continuing political turmoil, and blockades by local groups.

"This is the first time for three years that all our oil will flow freely, and I hope that this will be the end of the use of closure tactics in our country," NOC Chairman Mustafa Sanalla said in the statement. However, he did not say whether agreements had been struck with armed groups that control Sharara and El Feel and have in the past halted production.

The deal to reopen valves on pipelines from Sharara and El Feel in the northern town of Rayana had initially been announced last week by a local faction of Libya's Petroleum Facilities Guard (PFG). But officials at El Feel said a separate group of guards, from the Tebu ethnic group, were preventing a restart there.

Sanalla said the NOC "did not pay any money and there are no deals behind the scenes" to secure the reopening at Rayana. He said the expected production boost would earn $4.5 billion next year for Libya's economy, which is facing collapse because of conflict and the loss of oil revenue.

The NOC put the production capacity of Sharara at about 330,000 bpd, and El Feel at around 90,000 bpd. Sharara is run by the NOC, Repsol, Total, OMV and Statoil. El Feel is operated by the NOC and Italy's ENI.

Libya's output has already risen by more than 300,000 bpd since September, after forces loyal to eastern commander Khalifa Haftar seized several major ports in Libya's Oil Crescent from a rival faction and allowed the NOC to reopen them.

OPEC had used a conservative 351,000 bpd "reference production level" for Libyan oil output even when output in the country was near 600,000 bpd.

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