ABSTRACT

The decision is complex and urgent, as production is declining fast and must be increased. The company’s staff has no experience in the Arctic, and the potential joint venture partner does not seem much better in that regard. The CEO also knows that cost-effective transportation of gas from the Arctic requires a new pipeline, subject to a presidential veto in the United States and contested by environmental groups and First Nations in the area, all of which elevates the political risk of the venture. In addition, natural gas prices have been depressed for a long time. The introduction of the hydraulic fracturing technology for cost-effective exploitation of shale gas in the United States is likely to keep gas prices low, making the economics of investing in Arctic exploration highly uncertain.