November 2021

Regional Report: The Arctic

Different answers
Mike Slaton / Contributing Editor

Around the Arctic Circle, oil and gas development now centers primarily on Russia, Norway and the state of Alaska. Dramatic U.S. government changes have stalled federal development in the Arctic, with a series of pauses, suspensions and reviews that have stunned the industry with uncertainty, bureaucracy and litigation.

ConocoPhillips operations (left) on the western North Slope. Source: ConocoPhillips. West Hercules rig (center) in the Barents Sea. Source: Equinor. Nord Stream 2 pipelaying (right) in German waters. Source: Gazprom.
ConocoPhillips operations (left) on the western North Slope. Source: ConocoPhillips. West Hercules rig (center) in the Barents Sea. Source: Equinor. Nord Stream 2 pipelaying (right) in German waters. Source: Gazprom.

With the U.S. in disarray and Canada still sidelined by its own moratorium, the two remaining producing countries and the defiant state of Alaska are the contrasting hot spots of Arctic exploration and development, Fig. 1. Here’s a snapshot.


On Jan. 27, 2021, U.S. President Joe Biden issued Executive Order 14008, titled “Tackling the Climate Crisis at Home and Abroad.” It required a “pause” in new oil and natural gas leases on public lands or in offshore waters, pending completion of a comprehensive review and reconsideration of Federal oil and gas permitting and leasing practices.” The pause impacts the Arctic National Wildlife Reserve (ANWR), Naval Petroleum Reserve Alaska (NPA-A) and the Beaufort Sea.

The pause was then paused in June, when a district court in Louisiana ordered federal onshore and offshore leasing to continue while the review was underway; and in August, the Department of the Interior (DOI) appealed the injunction, claiming current programs fail to adequately consider global warming.

Interior Secretary Deb Haaland claimed the pause was only temporary while describing the federal oil and gas program as “fundamentally broken.” Ongoing reviews of drilling rules and environmental impact statements (EIS), spurred by a constant stream of environmental and indigenous opposition, seem to ensure that any pause is lengthy.

Fig. 1. Russia, Norway and the State of Alaska. Map: EIA.
Fig. 1. Russia, Norway and the State of Alaska. Map: EIA.

ANWR. Long-awaited leasing in the Arctic National Wildlife Reserve (ANWR) started slow and ended quickly. On Jan. 6, 11 tracts on a sliver of highly contested coastland were bid in the Bureau of Land Management’s first-ever sale in the 1.56-million-acre Reserve. The sale was the first of two ordered by Congress in 2017 to develop what may be between 4.25 and 11.8 Bbbl of oil. The second sale is set to happen by 2024.

Nine leases were awarded on Jan. 19, and they made it about a week before the executive moratorium put the deals on hold. By June, the ANWR leases had gone from paused to suspended, and a new environmental review process was set in motion. The action also delayed processing of seismic applications, pending completion of the supplemental environmental impact statement (EIS).

Expectations for the sale were never high—restrained by costs, regulations and persistent opposition to any Arctic development. Only a handful of operators bid on just half the total ANWR offering, raising a total of $14.4 million. The Alaska Oil and Gas Association said the outcome reflected “brutal economic realities” and “ongoing regulatory uncertainty.”

Bids on the 552,802 acres came from just three companies: nine from the state agency Alaska Industrial Development and Export Authority (AIDEA), and one each by private companies Regenerate Alaska and Knic Arm Services. The final results awarded AIDEA seven of its bids, for a sale total of nine leases comprising 437,804 acres, Fig. 2.

Fig. 2. Results of the first ANWR lease sale. Source: BLM.
Fig. 2. Results of the first ANWR lease sale. Source: BLM.

More dismal results may have been avoided, when the total offering was reduced in December before bidding even began. BLM withdrew acreage in the southeast, as protests continued over the calving area of the Porcupine Caribou Herd. Most of the comments opposed any leasing of the Coastal Plain, said BLM, and many were “nearly identical” to those received in preparation of the program’s environmental impact statement. The comments still led to elimination of 10 tracts (475,000 acres) for the final total of 22 tracts comprising 1,089,053 acres.

NPR-A. The new environmental statement for the NPR-A, published last June, was delayed in January when BLM, prompted by “an abundance of stakeholder requests,” extended public comment by 15 days and set in motion a review process of undetermined extent.

The new EIS was initiated in November 2018 to develop a management strategy focused on an environmentally responsible approach to leasing and development, traditional uses of the land, and maintaining access to subsistence resources. Its intent, said BLM, is to identify management alternatives for different land allocations and revise lease stipulations and operating procedures to protect important resource values.

The EIS, which was informed by a 75-day public comment period, reflects significant changes to operating procedures and lease stipulations, said BLM. The final version, Alternative E, would allow for 18.6 million acres, or 82% of NPR-A’s subsurface estate, to be open to oil and gas leasing. This increases the area open to leasing by about 7 million acres, closes over 4 million acres to leasing, and restricts activities with no-surface-occupancy stipulations and timing limitations to mitigate the impact on caribou calving and bird habitats.

Originally known as Naval Petroleum Reserve No. 4, the area was set aside for its potential petroleum value by President Warren G. Harding in 1923. The 1976 Naval Petroleum Reserves Production Act designated the roughly 23-million-acre area specifically for oil and gas development, renamed it the NPR-A, and transferred administration from the Navy to the BLM.

NPR-A Willow. ConocoPhillips’ high-profile Willow project is facing challenges to the competency of environmental decisions made last year by two Federal agencies. Allied conservation and indigenous groups in November brought a case to stop the project, claiming BLM and U.S. Fish and Wildlife Service had underestimated the plan’s impact on wildlife and did not address harm to Arctic communities and public health.

ConocoPhillips intervened in April and worked with opposition groups to establish a timeline and resolve the dispute while stopping construction until Dec. 1. But in May, the Department of Justiceh rejected the case, and said BLM and U.S. Fish and Wildlife had indeed followed environmental laws.

That lasted until August, when a U.S. District Court ruling reversed the original environmental study, setting aside approval by BLM and vacating Wildlife’s opinion that the project was unlikely to jeopardize polar bears or their habitat. The Court said the approval was flawed, because it failed to thoroughly analyze potential greenhouse gas pollution and didn’t fully consider legal protections for the Teshekpuk Lake subsistence area.

In response to the decision, U.S. Senators Lisa Murkowski (R) and Dan Sullivan (R), and Congressman Don Young (R), all from Alaska, said a joint statement, “The Willow Project was approved only after years of analysis and public input, including a robust environmental impact statement to ensure the project meets the highest environmental standards.” They estimated it would provide $10 billion in revenue for state, local, and federal governments during its lifespan.

A huge undertaking, Willow includes the construction, operation and maintenance of an oil and gas development within the NPR-A, with a central processing facility; an infrastructure pad; up to five drill pads with as many as 50 wells on each pad; access and infield roads; an airstrip; pipelines; and a gravel mine. Peak production is estimated at 130,000 bopd, with 590 MMbbl of oil produced over its 30-year life, Fig. 3.

Fig. 3. Willow project in the NW NPR-A adjacent to state lands. Source: BLM.
Fig. 3. Willow project in the NW NPR-A adjacent to state lands. Source: BLM.

Beaufort Sea.The January suspension of lease sales just added to the difficulties of Beaufort Sea development, including an already delayed leasing program and a draft of new drilling rules. As yet unapproved, the 2019-2024 National OCS Oil and Gas Leasing Draft Proposed Program provides for three OCS sales in the Beaufort Sea: one each in 2019, 2021 and 2023. BOEM had advised in 2019 that the scoping period for the EIS had ended, and it would prepare a draft statement. Meantime, the 2019 sale period passed without BOEM comment.

Also in the works are changes to the 2016 Arctic Exploratory Drilling Rule regulating OCS exploration in the Beaufort Sea and Chukchi Sea. New rules were proposed in November 2020 by the Bureau of Safety and Environmental Enforcement and Bureau of Ocean Energy Management. That produced a notice of proposed rulemaking, which initiated a 60-day public comment period, to be followed by the agency review process.

In addressing the need for rule changes to lessen the regulatory burden and ensure safety for exploration, Trump administration Deputy Secretary of the Interior Kate MacGregor said the presence of Russia and others in the Arctic made it increasingly important to ensure that the United States has a strong presence in the Arctic OCS.

The proposal cut about 50% of the existing provisions, marked 10 for revision, and added 12 more. An agency team of career subject matter experts and regulatory specialists examined research from a BSEE-commissioned Technology Assessment Program study and National Petroleum Council Reports, and consulted with leaders of more than 23 Alaska Native tribes, Alaska Native Claims Settlement Act (ANCSA) corporations and municipalities throughout Alaska.


With Federal oil and gas development suspended, stalled and otherwise lacking, the U.S. Arctic’s near-term future (at least) depends on the State of Alaska, including a slate of continuing lease sales. The Alaska Department of Natural Resources (DNR), Division of Oil and Gas, announced in September that it would offer state lands for competitive oil and gas leasing in the North Slope, Beaufort Sea and North Slope Foothills.

The North Slope Areawide sale covered 5.0 million acres in 3,121 tracts, ranging in size from 160 to 5,760 acres. Tracts were within the North Slope Borough between the Canning River and ANWR on the east and the Colville River and NPR-A on the west. The North Slope Foothills Areawide sale encompassed 4.3 million acres in 818 tracts, ranging in size from 240 to 5,760 acres, located between ANWR and NPR-A. The Beaufort Sea Areawide sale offered 1.7 million acres on 570 tracts, ranging in size from 530 to 5,760 acres, which were in state-owned tide and submerged lands in the Beaufort Sea.

Bids were submitted by Oct. 28, and preliminary public results were released on Nov. 3. Unfortunately, operator interest was rather mild. Just six bids were received, covering 14,080 acres and totaling $467,609 in bonus bids from two bidders.

Lagniappe Alaska, LLC, bid on five tracts covering 12,800 acres to the southwest of the Badami unit, in the North Slope Areawide sale. Lagniappe offered a total of $429,132. The Louisiana-based independent already has a block of about 167,000 acres of leases in that area. The other successful bidder in the North Slope sale was Savant Alaska, LLC, which bid on one tract totaling 1,280 acres adjacent to and south of the Badami unit. Savant offered $38,476 for the tract. Savant has operated the Badami unit for more than 10 years.

The state received no bids for either the North Slope Foothills sale or the Beaufort Sea sale, said Tom Stokes, director of the Division of Oil and Gas. He noted that 45% of the state’s Beaufort Sea acreage is already under lease, as is 40% of the North Slope area.


“The potential of the Arctic zone is huge,” said Russian Deputy Prime Minister Alexander Novak. In a September TASS article, he reinforced Russia’s commitment to Arctic development, where offshore resources, alone, could be 15 billion tonnes of oil and 100 Tcm of gas. Because operating in the region is so expensive, he said the government would continue providing encouragement in the form of provisions and subsidies and, in some offshore cases, eliminating taxes entirely.

Much of this development is onshore, where Russia is vigorously exploring, drilling wells, and building a wide scope of infrastructure from processing plants and pipelines to icebreakers. Arctic offshore development, still under U.S. sanctions, is slower-paced but still ongoing.

Nord Stream 2. Also in September, Gazprom announced it had finished construction of the $11 billion Nord Stream 2 natural gas pipeline, which will deliver gas from the Arctic to Germany via the Baltic Sea. Last year, the unfinished pipeline was at an apparent standstill that was reinforced by State Department clarifications to the original 2017 sanctions act.

But in May, the politically charged project got wings, when the Biden administration said it was waiving sanctions on Nord Stream AG, the German company managing the project. At the same time, it imposed sanctions on four Russian ships involved in pipelaying, and a handful of Russian companies. Gazprom began filling the line in October.

Vostok oil project. Upstream of Nord Stream 2, Russia is busy on many Arctic fronts. For example, in November 2020, Rosneft started operations for its massive Vostok oil project in the Krasnoyarsk Territory of central and eastern Siberia. Initial steps identified priority sites for up to 150 well pads, and completed designs for a 480-mi pipeline and a port.

By 2024, the company expects 30 million tonnes of oil will be moved from the Arctic along the Northern Sea route. To improve navigation of the Northern Sea Route, Russia is building lots of big icebreakers. The Arktika was launched last year, and four other nuclear-powered icebreakers are under construction.

The Vostok project is described as one of the largest in the oil and gas industry. It is centered on existing fields in the Vankor cluster, Payakhskoye field, the newly discovered Zapadno-Irkinskoye field, and exploration licenses on the Taimyr Peninsula.

Rosneft said investment incentives for infrastructure were key to starting the project, which includes the creation of 15 towns to house oilfield workers; two airports; a seaport; 800 km of line pipes; 7,000 km of infield pipes; 3,500 km of electrical lines; 2,000 MW of electric power; and about 100,000 new jobs. It is expected to boost the country’s annual GDP by 2%.

Kara Sea. Gazprom reported that its Kara Sea exploration well in Leningradskoye field tested 1 MMcmd, reportedly a record for fields on the Russian Arctic shelf.

Yamal. Novatek said its Arctic LNG-1 subsidiary won the license for a geological survey, exploration and production in the North-Gydanskiy area of the Yamal-Nenets Autonomous Region on the Gydan Peninsula, and partly in the shallow waters of Gydan Bay of the Kara Sea. The North-Gydanskiy license area has estimated hydrocarbon resources of 9.8 Bboe.


Canada’s moratorium on Arctic offshore activity is due for review at the end of this year. In 2016, Canada joined the U.S. in the ban. The U.S. reversed its executive decision in 2017, but Canada did not. As a result, Canadian Arctic development has been idle for quite a while. The last time that offshore exploration licenses were issued was in 2014.

The ban is indefinite but up for review every five years. Due by Dec. 31, 2021, the review must confront constant opposition efforts to extend the ban. The review will include a July 2019 order that expanded the scope of the moratorium by prohibiting all offshore oil and gas activities in the area.


Fig. 4. <i>Transocean Enabler</i> rig. Source: Equinor ASA by Jan Arne Wold / Woldcam.
Fig. 4. Transocean Enabler rig. Source: Equinor ASA by Jan Arne Wold / Woldcam.

Equinor was awarded two operated production licenses in the 25th licensing round, in the Barents Sea: PL 1133 and PL 1134 in the Hoop area. The company said the locations will enable tie-in of any future discoveries to Wisting field.

Arctic operations also got a boost this year, with Equinor’s discovery near its Johan Castburg complex in the Barents Sea. Recoverables are estimated at 31 MMbbl to 50 MMbbl of oil. Exploration well 7220/7-4 is the first of four planned exploration holes by Equinor in the Barents Sea during 2021. It was drilled by the Transocean Enabler drilling rig, which returned to drilling on Johan Castberg field, Fig. 4.

“Succeeding in the Barents Sea requires perseverance and a long-term perspective. This discovery strengthens our belief in the opportunities that exist, not least around the Castberg, Wisting, Snøhvit and Goliat areas,” said Nick Ashton, Equinor’s senior vice president for exploration in Norway. This is the eleventh exploration well in production license 532. The license was awarded in the 20th licensing round during 2009.

About the Authors
Mike Slaton
Contributing Editor
Mike Slaton is a contributing editor.
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