- SEPTEMBER 2, 2011
With the U.S. locking up Alaskan and Arctic oil, a major turns to Russia.
- Few companies wring more earnings from a dollar of investment than Exxon Mobil, so we assume CEO Rex Tillerson knows the risks he’s taking by getting into business with Vladimir Putin to explore for oil in the Russian Arctic. Exxon’s official partner may be Rusneft, the Russian oil company, but in Moscow the de facto chairman of every board is Mr. Putin. If he turns against you, your investment may vanish faster than you can say Mikhail Khodorkovsky.
That well-known political risk makes it all the more disconcerting to see a U.S. oil company committing to invest billions of dollars in Russia’s Arctic Sea, while much of America’s own Arctic territories remain off-limits for political reasons. Exxon has long experience drilling in Alaska, and the Arctic National Wildlife Refuge is less risky or costly than drilling in the Arctic Sea will be. But Democrats in Washington have barred that and elsewhere in Alaska from energy exploration.
The Obama Administration is using regulations to thwart development in the American far north. The primary gambit is to sit on lease permits. Conoco spent five years to get at one of its leases in the National Petroleum Preserve, only to be denied by the Army Corps of Engineers. The Corps denied an Exxon permit on the North Slope. Shell this year threw in the towel in the Beaufort Sea after a five-year fight for a permit with the EPA. No wonder Exxon Mobil decided to do business with the Russians. What’s the alternative?
