UK Government Rejects Lawmakers' Calls to Halt Arctic Oil Drilling

LONDON - The U.K. government has rejected lawmakers' calls for a halt to Arctic oil and gas drilling, despite renewed safety concerns following the recent grounding of Royal Dutch Shell PLC's Kulluk rig off Alaska, saying that securing global energy supplies was paramount.

The U.K. government's comments, published Tuesday, come as Shell Monday said it had safely towed the Kulluk rig to safe harbor on Kodiak Island in the Gulf of Alaska. The rig ran aground in stormy weather Dec. 31 while under tow, further highlighting fears about the environmental risks of oil extraction in the Arctic.

The government said that while it recognized the risks of drilling for hydrocarbons in the sensitive Arctic region, high environmental and drilling standards, efforts to enhance oil spill prevention and response mechanisms would be more effective than a ban.

"We believe these measures--combined with effective and ambitious global action to reduce global greenhouse gas emissions--are more likely to be effective in protecting the Arctic environment than pressing for a complete moratorium on all drilling in the Arctic region," the government said.

The government was responding to a report from the U.K. parliament's Environmental Audit Committee in September last year, which recommended an immediate moratorium on Arctic drilling until safety is improved.

The lawmakers want to see a pan-Arctic oil spill response plan, research showing that response techniques will work in extreme conditions and the introduction of stricter financial liability rules for oil and gas companies operating in the area.

However, the U.K. government said the International Energy Agency's recent global oil demand and supply forecasts implied a need to source substantial new production capacity between now and 2035. New oil supplies are vital for the U.K., which is becoming increasingly dependent on oil imports as its domestic hydrocarbon production declines.

"It is against this background that we need to ensure we have continued access to a well supplied and competitive world oil market, whilst reducing our exposure to volatile oil and gas prices," the government said.

The U.K. has no power over the Arctic, but it does have observer status on the Arctic Council, a grouping of eight Arctic states that discusses Arctic issues.

Joan Walley, the chair of the Environmental Audit Committee said the grounding of the Kulluk rig raised serious questions about the safety of Shell's operations in the Arctic and the committee would be calling them back to parliament to give further evidence.

Copyright (c) 2012 Dow Jones & Company, Inc.

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