The first company which will have a leak of oil [in the Arctic]... a drop, is a dead company.

-- Christophe de Margerie, Total CEO 


At a recent event at the Council on Foreign Relations, Total's (NYSE:TOT) CEO did not mince words about the risks of drilling for oil in the Arctic: It's risky, and the chances of an oil spill in the region is simply too great for Total to justify investing in oil exploration there. While there are differing opinions across the oil space regarding if and how we should explore drilling in the Arctic, de Margerie's statements raise a very poignant question for oil and gas investors: How much are our energy investments at risk of a "giant killer"-type accident? Let's take a look at the risks involved in Arctic drilling and who is involved in the Arctic.

The final frontier 

Alaskaoildrilling

Source: U.S. Minerals Management Service. 

Oil and gas in the Arctic is quite possibly one of the most tempting oil fields on the planet. According to a 2008 assessment by the U.S. Geological Survey, there are more than 400 billion barrels of oil equivalent that are technically recoverable in the Arctic regions, 84% of which is found in the offshore regions. This would represent more than 22% of the proven reserves in the entire world. 

The problem with drilling in these regions is that it is so technically challenging. We need only ask Royal Dutch Shell (NYSE:RDS-A), which spent $5 billion trying to explore the offshore region of the Chukchi and Beaufort Seas, only to come up with no productive wells and a grounded drilling rig to show for it. In some ways, Shell was lucky -- the incident resulted in no spill.

The biggest wake-up call for the industry about the risks and costs of drilling in the Arctic may not even come from the Arctic but rather the Macondo incident in the Gulf of Mexico. So far, BP (NYSE:BP) has spent $42 billion on spill response, civil claims, and criminal charges. And the company could still be on the hook for as much as $17 billion in fines for violating the U.S. Clean Water Act. There are very few companies out there that are capable of sustaining $70 billion in fines and payments related to a spill; even BP is still limping since the incident. Considering the additional challenges a company could face in the event of an Arctic spill, it is not a complete stretch of the imagination that a spill in the Arctic could do similar, if not worse, damage to a company's bottom line. 

Who's ready to take the risk?
Despite the Shell incident not getting an immense amount of attention in the media, companies that were planning to drill in the Arctic have started to lose the stomach for it. ConocoPhillips (NYSE:COP) has shelved its plans to drill off the coast of Alaska, Norways' Statoil (NYSE: STO) has curbed plans for some of its major development plans in the Arctic, and Shell has also said that is reconsidering how it wants to proceed off the coast of Alaska. 

Not to say that drilling in the Arctic is completely off the table, either. Even Total has plans for drilling in the Arctic, but more specifically it is only drilling for natural gas and in regions where it's constantly under ice for the very reason that de Margerie mentioned above. BP for many years has tried to ink deals to epxlore the Russian arctic through its ownership in TNK-BP, and Italy's Eni (NYSE: E) has aslo carved out a large exploration stake in the Barents Sea.

Of all the companies looking to strike it big in the Arctic, though,  ExxonMobil (NYSE:XOM) is far and away taking the largest bet. It has an agreement with Russian oil giant Rosneft to explore nearly 400,000 square miles of the Arctic. For reference, that is about the size of California and Texas combined.

What a Fool believes
It is not a coincidence that all the companies listed above are some of the largest in the oil business, and some of them even have partial government ownership. It's extremely difficult to fathom any of them ever going completely under from a spill in the Arctic, but the technical challenges of the region for both drilling and spill response are certainly giving even the largest players in the space pause. As rare as these types of events may be, investors do need to consider the risk these kinds of operations have on investments -- and invest accordingly. 

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter, @TylerCroweFool.

The Motley Fool recommends Statoil (ADR) and Total SA. (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.