Drilling for Arctic oil is not viable yet, says IEA chief
Shell is undertaking exploratory Arctic drilling off the Alaskan coast after the Obama administration granted it a green light in August. Environmental groups have urged a ban, saying it risks one of Earth’s last pristine landscapes and is contributing to climate change, which this week was blamed for Arctic sea ice shrinking to its fourth lowest ever level.
But the intervention of Fatih Birol, incoming executive director of the International Energy Agency (IEA), is likely to carry more weight with governments and businesses. He told the Guardian that the technology was not ready, and faces hurdles that may prove too costly to overcome.
“I believe that Arctic oil is not for today, and not for tomorrow – maybe for the day after tomorrow,” he said. “It’s geologically difficult, technologically difficult, lots of environmental challenges, and the cost of production is very, very high, especially if you look at the current oil price levels.”
Birol stopped short of recommending an outright ban, but urged leaders of states and businesses to look deeply into the issues before embarking on expeditions.
“It should be an assessment of the oil company, whether or not they see a business case at those prices for oil, or at those costs of production – whether or not it could be a profitable project,” he said. “I think the companies should look at all these risks combined. It is up to them to make or lose money.” Shell has already spent £4.5bn proving resources in the Arctic exist.
He warned governments to consider the potential risks, including those of climate change and pollution. “Governments should hold projects from the angle of whether or not it makes economic sense for the country, for this business, whether or not it has implications for the local and the global environment. And they should also think of what supports the energy security of their country.”
Birol said that, despite the constraints of climate change the world would continue to use oil for some decades, but that the question of whether it came from the Middle East and other established oilfields, shale deposits, or the Arctic would “depend on the economics”.
Birol took over as executive director of the IEA this month, from his longstanding position of chief economist at the agency, which is regarded as the gold standard on energy issues. He has long been a champion of clean energy, and was one of the first economists to put climate change at the heart of the world’s energy policy.
His role will be key in the run-up to the crunch climate change conference later this year in Paris, where the IEA is also based, at which the United Nations is hoping to forge a new global agreement on reducing greenhouse gas emissions post-2020.
So far 62 countries have submitted pledges on cutting emissions ahead of the Paris summit, with many more expected in the next fortnight. To date, however, the prospect of monitoring those pledges and holding governments to account has been a thorny one, with many nations balking at independent oversight of their progress towards their targets, because of fears over national sovereignty.
Birol plans to cut through this by publishing the IEA’s own comprehensive data on energy use, and assessing annually whether countries are on track for their targets, as well as how they could be ratcheted up in future. This would be a new role for the IEA, and one that will add sharper teeth to any pact reached in Paris.
“I believe our analysis will show that no energy company can afford to ignore the upcoming climate policy push internationally. If they do so, that may well have implications for the financial performance of their companies.”
Birol, who has never bought a car, and has lived in the same small 43sq metre apartment in Paris as he did 20 years ago on joining the IEA, is in a better position than most to propound his vision of tackling climate change while bringing electricity and affordable energy to the poor across the globe.
While the directorship is usually a political appointment taking turns across the Organisation for Economic Co-operation and Development’s (OECD) member countries, he is the first to be promoted from within and to receive unanimous backing from the states involved.
“Seven years ago, the IEA started to look at the implications [for the climate] of using energy. And this one number made me convinced that we have to work on climate change very, very hard – that two-thirds of the emissions causing climate change come from the energy sector. I was very clear from the beginning that our aim should be how to transform the energy sector.”