Oil industry unlikely rush to Alaska despite Trump’s call for drilling

U.S. companies will not expand their development in Alaska or the Arctic after President Donald Trump signed an executive order that allows them to do so. Industry representatives and company officials said this, pointing out that a future president would be able to reverse Trump's decision.

U.S. Oil Production is Already at Record Levels. This is largely due to the increased production of oil in more accessible areas such as Texas and New Mexico. Companies have also limited their spending on new projects, focusing on returning cash to investors.

Analysts say that drillers might not be eager to seize the opportunity of Trump's Monday order titled, "Unleashing Alaska’s extraordinary resource potential."

The executive order will reopen vast regions for drilling and mining and speed up permits for projects. It is part of Trump's plan to maximize oil production and reverse former President Joe Biden’s policies encouraging the switch to renewable energy sources in an effort to combat climate change.

Dustin Meyers is the senior vice president for policy at the American Petroleum Institute. The trade association represents Exxon Mobil and other major oil companies, including Chevron Corp., ConocoPhillips, among others.

He said that there is always the possibility that these areas will be closed after the next electoral cycle. This is what could dampen the interest of oil companies to undertake new drilling projects in the near future.

Drilling in Alaska and the Arctic is a risky endeavor that involves decades of effort and billions of dollar investments.

Exxon, Chevron Conoco and Occidental Petroleum have not commented.

Conoco, one of the most active oil firms in Alaska's Arctic region, has received federal approval for its $8 billion Willow Project in Alaska in 2023. This angered environmental groups.

AXPC, the U.S. industry group for drilling, also declined to comment.

Sources at a major U.S. Oil Company, who did not want to be identified, stated that many companies would not pursue projects in Alaska solely based on Trump’s executive order, but instead, they are looking for long-term certainty, such as an act by Congress.

Rystad, an energy consultancy, said Trump's use in his inaugural speech of the mantra "drill baby drill" overestimated the industry's willingness and ability to prioritise growth over shareholder returns.

The drilling of Alaska's Arctic Refuge has been a source for friction between Alaska legislators and tribal corporations that want to open up more acres to oil and gas exploration to stimulate economic growth and Democratic presidents who wanted to preserve the local wildlife and ecosystem.

A tax law passed in 2017 during Trump's initial term required oil and gas leases to be sold at the Arctic National Wildlife Refuge. This 19-million-acre refuge is home to polar bears, Porcupine Caribou and other species. There has been little interest.

Last year, when the Biden Interior Department offered the minimum of 400,000 acres for the refuge as a minimum bid amount, it received no offers from energy companies.

ANWR is a wild area with no roads or public facilities. But its 1.6-million-acre coastal region along the Beaufort Sea has up to 11.8 trillion barrels of oil that can be recovered. This would supply the U.S. at current rates for over a year and a quarter.

Biden, who is leaving his office at the end of this month, banned all new offshore drilling in federal waters, including those off the East Coast, West Coast, eastern Gulf of Mexico, and parts of northern Bering sea in Alaska. This move was largely symbolic, since it covered areas that had no significant prospects.

Trump has issued an executive order to repeal these protections.

API's Meyers said that the energy industry remains "cautiously hopeful" that Trump will continue to ease regulations that have hindered oil and gas development.

He said that the administration should be commended for doing all they could to signal that these areas were open to development. Reporting by Sheila Dang and Valerie Volcovici, Washington; editing by David Gregorio

(source: Reuters)