Polar Bears Have a New Enemy as Italian Oil Giant Vows to Drill in Arctic
Italian oil giant Eni has vowed to press ahead with oil production in the Arctic by the end of the year, undeterred by Shell’s decision to abandon its quest for Arctic oil.
As environmentalists celebrated Shell’s retreat from the Chukchi Sea this week, Eni is meanwhile making final preparations to a $5.5bn (£3.6bn) project in the Norwegian Arctic.
The Goliat project is set to become the world’s northernmost offshore oil field to come on stream, eventually pumping 100,000 barrels of oil per day from reserves believed to hold around 175m barrels of oil and 8bn cubic metres of gas.
A spokesman for Eni told the Guardian that work at Goliat is at its “final stage.” The project’s 64,000-tonne floating platform is already in place and its wells have been drilled, ready for imminent production.
But Eni, one of Europe’s largest oil and gas companies, is still awaiting final approval from Norwegian authorities. On Monday, the Petroleum Safety Authority (PSA) told Reuters: “There is still some work left to do at Goliat.”
Starting up production at Goliat represents an important milestone for the oil and gas industry as it looks to prise open the Arctic as a major new frontier, but it has come at a price. Completion at Goliat is two years behind schedule and reportedly around £1.1bn over budget.
Earlier this year, as Shell’s return to the Arctic attracted international media and environmentalists’ attention, Eni maneuvered one of the largest oil platforms of its kind across the world in a 63-day voyage from a shipyard in Korea to the Barents Sea, 80km north off Norway – sailing unnoticed around the UK in the spring.
Eni’s spokesman sought to distance the Goliat project from Shell’s pursuit for oil in the Alaskan Arctic. He insisted Goliat is operating in a region considered by the industry as “the manageable Arctic” since it remains largely ice-free compared to other regions of the Arctic.
But the Goliat project – which Eni has developed with Norway’s state-owned Statoil – is undoubtedly part of the oil industry’s push further north into Arctic waters in search for untapped reserves.
Eni’s giant floating oil platform has been tailor-made to operate in hostile Arctic conditions. It has been “fully winterised”, according to the company’s website, and built to withstand once-in-100-year Barents Sea storm conditions and ice.
Environmentalists acknowledge conditions in the Norwegian Arctic are less risky than in other parts of the polar region, but question the notion of a “manageable Arctic”.
Suzanne Dhaliwal, a prominent campaigner and co-founder of the UK Tar Sands Network, believes this argument leads to “slowly sliding to a mindset where Arctic drilling becomes socially acceptable.”
Dhaliwal added: “We know the Goliat platform is a different beast and protection of the Arctic must continue for communities in the region and to respond to global climate change.”
In Norway, opponents to the Goliat project have deployed similar arguments to those made against Shell’s Arctic exploration programme in recent months, albeit less visibly.
Truls Gulowsen, the head of Greenpeace in Norway, pointed to the broader environmental and economic reasons for opposing Goliat. He said: “We know we need to keep 90% of proven fossil reserves in the ground so a good place to start would be one of the most precious, pristine and vulnerable areas of nature we still have.”
Gulowsen highlighted research by Norwegian analysts that found Eni needs oil prices to average around $95 per barrel in order for the Goliat project to break even. But with production perhaps just weeks away, Goliat risks becoming a white elephant as oil prices hover around $45 per barrel.
“It’s our opinion that Goliat will remain a symbol of abject failure for years to come,” Gulowsen added, “From a purely economical standpoint the project is already a disaster.”
Earlier this month, analysts at Goldman Sachs suggested oil prices could slide to as low as $20 a barrel. The potential for prices to fall as low as this is becoming greater, they said, adding to questions around the viability of expensive projects like Goliat.
Yet starting up production at Goliat has symbolic importance for Eni, after it was forced to cut its dividend earlier this year.
Along with Eni’s recent discovery of a “supergiant” gas field in the Mediterranean Sea, Goliat represents a major boost for the Italian company as it seeks to re-establish itself as a major player in the exploration and production game and diversify away from its risk-exposed and war-torn projects in Africa.