Hot spots to fan the flames of oil's critics

Shell's Alaskan incident has raised more fears at the supermajors' move into new territories. Mark Leftly and Tom Bawden report

Tug boats battled 50 knot Arctic winds and 14-metre-high waves as they attempted to tie tow cables to the Kulluk oil rig. But Mother Nature won, leaving Royal Dutch Shell facing an unpleasant start to the new year when the Kulluk, which was carrying around 140,000 gallons of diesel, ran aground off the southern coast of Alaska near an uninhabited island.

There have been no signs of any oil leaks or environmental damage, while a Shell spokesman argues: "It's important to reflect that this is a maritime transportation incident, not a drilling incident. The core problem was the failure of the vessel towing Kulluk, the Aiviq, during exceptionally poor weather conditions."

Yet the problems have been seized on as another reason why big oil should not go near one Earth's last pristine ecosystems. Greenpeace blasted Shell for "staggering ineptitude" and campaigner Ben Ayliffe argues it is evidence "we're moving closer to a major catastrophe in the Arctic".

Shell has invested $4.5bn (£2.8bn) in Alaska as it seeks the oil needed to keep the world's ever-growing population warm, fed and on the move. Others have followed, though few doubt how difficult it is to drill in the Arctic, which includes territories belonging to Canada, Russia, Norway and Denmark.

US oil prices briefly fell below $92 a barrel on Friday, but this was due to fears over the US economy. Prior to 2007, the idea that oil could crash through the $100 barrier and then remain in or around that mark for several years seemed fanciful.

Now, that's the reality. As consumption increases, so the supermajors must check areas they previously wouldn't have ventured to find the vast reservoirs to sate demand and please investors with record profits and huge dividend pay-outs.

One problem is that they are under greater environmental scrutiny than ever before as a result of the BP and Transocean's Gulf of Mexico disaster in 2010. But all of the great new territories for oil exploration and production will prove difficult, and not all due to environmental issues.

Here are seven hot prospects – with real challenges ….

Iraq: North vs south

The south has long been the centre of Iraq's oil industry, while to the north the semi-autonomous Kurdistan's vast reserves have been neglected. This situation has changed in recent years, as $10bn of investment from foreign oil companies – including former BP boss Tony Hayward's venture, Genel – in Kurdistan shows.

Big Oil had been put off by a bitter row with Iraq's central government over who owns Kurdish oil. Last April, Kurdistan's regional government suspended oil shipments in protest at Baghdad's delay in disbursing $1.5bn owed to northern operators. Relations have improved, but the political situation is unstable.

Canada: Tar sands and the economy

Canada's oil reserves are the third largest in the world – the only problem is that most of it is in the form of tar sands, a mixture of bitumen, sand, water and clay.

The process of turning tar sands into oil is highly energy intensive, which means production is expensive and widely opposed on environmental grounds.

With the oil price expected to remain somewhere around its current, relatively high, level for some time to come, the Canadian tar sands industry is preparing to ramp up production. But backers are reluctant to finalise investments because they remain worried about the global economy.

The Arctic: Environment and the economy

The Arctic is one of Earth's last unspoilt environments and is home to important species of fish as well as endangered animals such as beluga whales and walruses. Shell is not alone in realising how much oil and gas lies beneath these treacherous waters, with BP and Russian majors among those seeking black gold.

Maria Damanaki, the EU's maritime commissioner, was moved to say "Arctic reserves could hold enough oil and gas to meet global demand for several years – this is a need the world economy has".

The Falklands: National battles

More than three decades after 900 British and Argentinian lives were lost over what the South American country calls the Malvinas, mutterings are again being heard over a potential for new conflict.

Just last week, Argentinian President Cristina Fernandez de Kirchner wrote an open letter to David Cameron in an advertisement taken out in several British newspapers including The Independent, demanding that the Falklands be returned to her country.

The difference now is that oil has been found in the North Falklands basin, with commercial production set to start in 2017. At present, most Falkland revenue comes from fishing.

East Africa: Taxation vexation

There were few regions hotter for prospectors in 2012 than East Africa. For years, small UK drillers hunted off the coast as majors turned their noses up when the fields turned out to contain more gas than oil.

However, Asian demand and the huge fields found have resulted in mind-boggling bids for small stakes in these projects, while ENI and Anadarko have teamed up to develop natural gas finds in the waters of Mozambique.

The problem, as Shell found when bidding for Cove Energy, is that governments are prone to changing tax rules to get a bigger share of the loot.

US: Fracking questioned

The US is set to leapfrog Saudi Arabia to become the world's biggest producer of oil by 2017, thanks to the controversial practice of fracking.

The technique, which involves blasting a mixture of sand, water and chemicals into shale rock to release hydrocarbons, has traditionally been used to extract gas. But it is increasingly used to produce oil in states such as North Dakota and Texas. However, a recent Opec report said the future of shale production is "likely to be beset by several constraints and challenges, such as environmental concerns, questions over the availability of equipment and skilled labour, rising costs".

West Africa: Political unrest

This side of the continent holds 45 per cent of its proven oil reserves, with major producing countries including Nigeria, Ghana and Angola. Already this year, Ivory Coast officials announced plans to increase production after finds by Tullow Oil and Vanco Cote d'Ivoire.

However, fears remain over the stability of countries only recently ravaged by war and corruption, as they do in North Africa post Arab Spring. The Ivory Coast's civil war claimed 3,000 lives in 2011 and Mali was hit by a coup last year.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...