Today Shell announced that they will stop drilling for oil on the continental shelve in the Chutki sea north of Alaska. This is bigger news than it seams at first hand.
The oil industry is valued on the basis of the oil reserves they poses. Nobody can measure this because the oil is buried under thousands of feet of rock and ocean. So financial experts rely on the estimations of geologists to make an appraisal of the potential. Oil companies need to have enormous reserves in order to justify their enormous stock values…it’s an obligation to their shareholders to possess lots of reserves. The value of the reserves can be checked by drilling test holes.
The good cheap fields like Texas, North Sea, Nigeria has been drilled to the last drop, something well understood because of the Peak Oil theory. Since the 1980’s oil companies have been drilling more and more extreme type of oil (tar sands, fracking) and more and more extreme locations like deep sea Gulf of Mexico. Every time oil geologists promised massive amounts of oil, but every time the prospects proved more expensive, less rewarding and dangerous (oil spill GOM) than yesterfield.
There were only couple of undrilled places: the dark side of the moon, the empty quarter in Saudi Arabia and ….. Alaska.
What happened today is that the oil industry as a whole has said … “Sorry, that Polar oil thingy?…not going to happen”
Expect major write offs from the oil majors, steep devaluation of oil stock and oil service industry and maybe, maybe a call for a plan B from them to guarantee our energy safety in the future.
The world is a sunnier place today!