CNBC: Drilling the Arctic region for oil cannot be justified against the background of the major shift in the global oil production paradigm, Goldman Sachs’ lead European commodities equity specialist said on Thursday.
“Overall the idea that we have to go into the Arctic to find new resources I think has been dispelled by the enormous cheap, easier to produce and quicker time-to-market resources in the Permian onshore U.S.,” Michele Della Vigna, commodity equity business unit leader in EMEA at Goldman Sachs, told CNBC’s Squawk Box on Thursday.
“We think there is almost no rationale for Arctic exploration,” he asserted, noting that while certain areas, such as the Russian Arctic, potentially have workable elements given that the location is much closer to the coast and easier to explore, other areas, such as Alaska, can fairly be considered more in the vein of vanity projects.
Della Vigna sees rapid ongoing progress being made in power generation, where he says wind and solar energy systems in different regions are already perfectly competitive – even without subsidies – and are now taking more than 1 percent market share each year.
The Goldman Sachs specialist noted that these sources of renewable energy are clearly winning out against hydrocarbons. He also pointed to the oversupply of gas, a dynamic which he sees persisting for the next 5 – 6 years due to “massive” LNG (liquid natural gas) capacity coming onstream from the U.S. and Australia, as lowering the price of that energy source.
“We think cheap gas with more competitive renewables will be the perfect combination to lower the carbon footprint of the world and shift away a lot of the demand from coal. Coal is going to be the stranded asset,” he predicted.