Arctic Antics

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The latest news from the North Pole is that Santa has decided to trade in his red costume and sleigh for a yellow hazmat suit and wrench. A career switch is certainly imminent if the oil giant BP and Russias Rosneft move into the neighbourhood to get their oil fix. As announced last week, such strategic alliances to exploit untapped natural resources sent energy markets soaring, but the truth is that this odd couples hunt for hydrocarbons on top of the world does not bode well for anyone. The deal gives BP access to an area long seen as the final frontier for energy exploration. The area north of the Arctic Circle contains just over a fifth of the world’s undiscovered, recoverable oil and gas resources and the Russian continental shelf comprises roughly half of all shelf in the Arctic Ocean. Before we start to feel that we are too far away from the Arctic region to give a hoot, the atmospheric and water cycle connects us in more ways than BP scientists would have you believe.

BP is the same company that gave us one of the worst ecological and economic disasters that we have ever seen. Few will ever forget seeing underwater oil plumes in live video feeds from the Deepwater Horizon oil spill even though global interest has waned since the days of Top Kill and Top Hat. The oil didnt exactly disappear and today the Gulf of Mexico is unfriendly to both fish and fisherman as oil residues and toxic chemicals begin to percolate around the world.

While we wait for a complete assessment of economic and ecological consequences to come in, it is appreciable that BP has never been good to its hosts. It has been especially unkind to the US where its errant ways have led to incidents such as the earlier Texas City Refinery explosion, allegations of propane market manipulation, and start-up delays of its projects. BP has gained so much notoriety for consistent failings in risk management, equipment, staff management, maintenance and inspection, and general health and safety at site, that perhaps American soil and water is becoming increasingly hostile for its operations. This would explain why the Russian connection is so strategic for BP, and it has more to do with simply endangering what may be the last untouched wilderness left on earth.

Deepwater Horizon was not just a disaster for the environment and the economy. To this date analysts estimate that final costs for BP will be upwards of thirty billion dollars. The Russian deal seems to be the only moneymaker for a company that had to dispose of most of its global assets to meet the cost of remediation, fines and lawsuits against it. It didnt even surprise us when BP silently sold off its assets in Pakistan in order to meet the rising costs of damage control, not least being a twenty billion dollar response fund created to take care of its liabilities in the US.

As a clearer picture emerges of an oil company with bills to pay and kids to feed, BP is starting to look all the more dangerous and desperate. It is precisely at this juncture that one would expect it to reduce costs by cutting corners and truly live up to its reputation of being an inherently unethical organization. Earlier last year, the Deepwater Horizon Commission reported that damage caused by an oil spill in one part of the Arctic may not be limited to the waters of the country where it occurred. Therefore bringing the potentially large oil resources of the Arctic outer continental shelf into production safely will require an especially delicate balancing of economic, human, environmental, and technological factors. Both industry and government will have to demonstrate standards and a level of performance higher than they have ever achieved before.

The good news is that Russia is not going at it alone and is courting non-Russian partners to help develop its oil and gas potential. But surely BP recognizes that Siberia is littered with the corpses of oil companies who thought Russia was the Promised Land, but instead found it populated by spies and thugs that ate them with caviar and a glass of ice cold vodka. That it should stoop so low is a sign of BPs desperation.

It is also a sign of amnesia as BP seems to have forgotten when Russia forced Shell to back away from a twenty billion dollar investment and started consolidating its control over oil resources given to foreign companies at throw away prices. There is thus an acute willingness to use the country’s growing strength in natural resources as a political weapon. Notwithstanding the fact that implementation of environmental requirements for offshore projects in the Russian Federation is uneven at best, BPs new CEO Bob Dudley needs to keep one eye on his partner and the other one should be watching out for radioactive polonium in his morning cuppa.

The writer is a consultant on public policy.