Quests to tap into potentially lucrative hydrocarbon reservoirs in the Arctic have slowed as companies suspend drilling plans amid ongoing environmental, regulatory, and safety concerns.

ConocoPhillips became the latest company to put off plans, postponing its 2014 Alaska Chukchi Sea exploration program. The move, following similar decisions by Shell and Statoil, was made because of “uncertainties of evolving federal regulatory requirements and operational permitting standards,” ConocoPhillips said in a news release.

The company has 98 lease blocks spanning about 558,000 acres in the Chukchi Sea. Plans were to begin exploration drilling in 2014.

The announcement April 10 came just more than a month after the US Department of Interior (DOI) issued a report on Shell’s 2012 offshore oil and gas exploration program, which was rife with setbacks and problems. The Kulluk drilling rig chartered by Shell ran aground the southeast Alaskan coast after separating from its towing vessels. Other setbacks included a damaged containment dome for the containment barge needed to gain certification for permits and air emissions permits violations

Shell addressed its Arctic operations in its 2012 sustainability report released April 11. Apologizing for the Kulluk drillship running aground and admitting the year’s events fell short of goals, Marvin Odum – upstream Americas director for Shell – said the company can manage the risks of operating in Arctic waters.

“We must not forget that the industry has been conducting safe operations in the Arctic for decades – proof that the industry can manage the risks,” Odum said. “Effective risk management is about improving safety by analyzing what could go wrong, minimizing the possibility of it occurring, and reducing the potential consequences. At Shell we have embedded this approach within our management system, and work continuously to enhance safety. Safe well operations demand highly competent people, strict safety procedures, and rigorous design, construction and maintenance standards for all equipment.”

The company will use the lessons learned in 2012 to improve future operations, Odum said. Future plans for the Arctic are being reviewed as Shell works with the US Coast Guard and DOI.

The DOI said Shell entered the drilling season not fully prepared, evidenced by the shortcomings and problems. Although the report mentioned areas in which Shell succeeded – drilling tophole sections for two wells, implementing weather forecasting and ice management systems that enabled quick response to changing sea ice conditions, and coordinating well with Alaskan communities – the mishaps indicated serious deficiencies.

The federal government has identified principles and prerequisites for safe offshore drilling in the Alaskan Arctic. These include mandates for operators to understand and plan for Alaskan conditions, maintain management and oversight of contractors, and establish plans with clear objectives in advance of the drilling season. The DOI also has encouraged the industry to work with the government to create an Arctic-specific model for offshore exploration, including drilling and maritime safety as well as emergency response equipment and systems.

“We welcome the opportunity to work with the federal government and other leaseholders to further define and clarify the requirements for drilling offshore Alaska,” Trond-Erik Johansen, president, ConocoPhillips Alaska, said in a prepared statement. “Once those requirements are understood, we will re-evaluate our Chukchi Sea drilling plans. We believe this is a reasonable and responsible approach given the huge investments required to operate offshore in the Arctic.”

US Sen. Lisa Murkowski, R-Alaska, said ConocoPhillips’ decision was disappointing but not unexpected.

“Alaska and the nation need the energy and the jobs that new oil production off Alaska’s coast would bring – but it’s a decision that’s not unexpected,” Murkowski said in a prepared statement. “Companies can’t be expected to invest billions of dollars without some assurance that federal regulators are not going to change the rules on them almost continuously.”

The Alaskan Arctic region holds the largest amount of undiscovered Arctic oil deposits, about 30 Bbbls, according to estimates from the US Energy Information Administration.

The US Geological Survey estimates about 90 Bbbl of oil, 1,669 Tcf of natural gas, and 44 Bbbl of NGL may remain undiscovered in the Arctic. The figures represent about 22% of the world’s undiscovered conventional oil and natural gas resource base, about 30% of its undiscovered natural gas resources; about 13% of the undiscovered oil resources; and 20% of the world’s NGL resources. Most of the natural gas and NGL are located among the Eurasian continents’ part of the Arctic, while the North American territory is believed to have more oil.

Given the region’s fragile environment in addition to increased scrutiny post-Macondo, watchful eyes are on companies with Arctic exploration plans. Companies are forming partnerships to study the Arctic and its challenges in hopes of finding solutions and gaining expertise. Statoil and DNV, for example, created the Arctic Competence Escalator program in March 2013 to do just that.

“The stakes are high in the Arctic,” the DOI said in its report. “The oil and gas resources in the Alaskan Arctic are potentially world class, and exploring for them requires years of planning and enormous up front capital expenditures.

“The risks are substantial and unique as well. As Shell’s experience last year makes clear, the waters off Alaska present myriad challenges and dangers during every phase of an offshore operation. A significant accident or spill in the remote and inhospitable Alaskan Arctic could have catastrophic consequences on fragile ecosystems and the people who depend on the ocean for subsistence.”

Contact the author, Velda Addison, at