For oil companies, the Arctic is hot again

In December 1979, in the wake of the Iranian revolution and the oil price shock, executives from the biggest energy companies converged on Fairbanks for an auction of leases to drill in Alaska's Beaufort Sea. Oil was nearing a then-record $29 a barrel. "This is the hottest area in North America," one of the executives told The New York Times.

Oil companies would go on to produce more than 10 billion barrels of oil from the North American Arctic. And counting.

This week, with oil at $65, the Interior Department approved Royal Dutch Shell's plan to drill up to six exploratory wells in the Chukchi Sea, just west of the Beaufort.

The world is awash in oil. The Arctic is prone to weather that can affect navigation, even in the summer drilling season. Shell has already stumbled there; a botched 2012 effort, when a drilling rig ran aground, spurred investigations by the Coast Guard and Interior, which turned up major environmental and safety concerns.

Why do it? The answer goes back to 1979. The development of enormous oil resources requires enormous amounts of money, time, and risk. There could be roughly 11 billion barrels of undiscovered economically recoverable oil in the entire Chukchi.

"The current oil price is actually somewhat irrelevant. The size of the resource is what's important," Marvin Odum, president of Shell Oil Company, told CNBC .

In 1989, Shell found hydrocarbons from exploratory wells in the Chukchi Sea, the leases for which it had acquired a year earlier.

If it finds riches and pursues them, the oil might find its way to market through a subsea pipeline. That's if Shell finds the reserves it expects in the Chukchi. And if, by the time it's ready to pump them up, they're fetching more than, what, $90 a barrel? No one can say what will make the endeavor profitable.