With Royal Dutch Shell
The president of Shell's U.S. unit, Marvin Odum, is hopeful that the company will resume drilling in Arctic waters off the coast of Alaska by the summer of 2012. Given the current macroeconomic situation of the oil markets, this was an obvious play. With oil prices pushing up along with the global demand, it makes little sense for a $220 billion oil giant not to start operations in 275 lease blocks off the Alaskan coast.
Alaska is estimated to hold more than 3.5 billion barrels of oil -- or about 17.2% of total reserves in the U.S. -- second only to Texas, which is estimated to have 5 billion barrels in reserves. However, at this point, Alaska accounts for only 11% of the country's crude oil production. Thus, upside potential in the region is understandably huge.
Of course, things aren't easy when it comes to drilling offshore in Arctic waters. BP
Shell has yet to obtain permits from the government to go ahead with the $3.5 billion investment. However, the company seems to have various proactive measures in place with a three-tier oil spill response system. This is the kind of preparation that will likely win the hearts and minds of politicians currently dealing with high energy prices.
In the long term, assuming that appropriate safety measures are built, this investment will likely augur well for this Anglo-Dutch company and for its investors. The potential is huge, and a company like Shell is capable of exploiting this opportunity to the fullest. From a larger standpoint, I think it's likely we're going to see oilfields in the Arctic opening up more and more. When energy markets become as volatile as they have been (in the upward direction that is), the protests of those against expanded drilling in the U.S. can't be heard quite as loudly.
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