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An oil & gas Shangri-la in the Arctic?

Scientists say the Arctic contains 25% of the world's undiscovered oil and gas. Why not 100%?
     — Stephen Colbert, from the Colbert Report

Story after story in 2007 has proclaimed that the race is on in the melting Arctic: there's black gold in them thar' hills! It seems a shame to rain on everybody's parade. What's the harm of letting the polar nations indulge their fantasies of new fossil fuel riches? Unfortunately, problems with the oil supply are happening now and these problems will be getting worse in coming years. Arctic oil & gas will not bail us out in any time frame we care about, so it would be prudent to deal with reality instead of spinning new fantasies that provide a convenient excuse to do nothing about the looming oil crisis.

Sea Ice Trend Arctic Dreams (ASPO-USA, April 25, 2007) provided an overview of uncertainties and difficulties concerning polar oil & gas. So why the update? For starters, things are "heating up" in the North. The National Snow and Ice Data Center (NSIDC) announced the bad (good?) news in Arctic Sea Ice Shatters All Previous Lows. The data indicates a radical discontinuity in the linear trend measured by satellites since 1979 (graph left). "If that's not a tipping point, I'd hate to see what a tipping point is," said Mark Serreze, [NSIDC's] senior research scientist. (Fight for the Top of the World, Time Magazine, September 19, 2007). The big meltdown briefly opened up the fabled Northwest Passage for normal shipping for the first time in recorded human history.

Another update of interest comes from the USGS, which announced its New Oil and Gas Assessment of Northeastern Greenland on August 28, 2007.

"This is the first systematic and comprehensive analysis of the undiscovered petroleum resources of the Circum-Arctic in the public domain," said USGS Director Mark Myers. "Knowing the potential resources of the Arctic — an area of tremendous resource potential, environmental sensitivity, technological risk and geological uncertainty — is critical to our understanding of future energy supplies to the United States and the world."

Because of the great potential of the Arctic, the USGS has undertaken a comprehensive assessment of the area in order to provide consistent and comparable geologically based estimates of the potential additions to world oil and gas reserves. Northeastern Greenland is the prototype for the USGS Circum-Arctic Resource Appraisal [CARA], and the USGS will be releasing assessments of all the Arctic provinces over the next year.

[Go here for other related documents.]

An oft-repeated statement, always attributed to the USGS, says that Arctic contains "25% of the world's undiscovered oil & gas reserves." This has become a mantra for those reporting on the region's hydrocarbon potential. The usually reliable Christian Science Monitor states that "the US Geological Survey [USGS] estimates that 25 percent of the world's undiscovered oil and gas reserves lie beneath the Arctic Ocean" (July 31, 2007). Geologist Don Gautier, who leads the Arctic evaluations, bristles at the suggestion that he or anyone else at the USGS ever said any such thing. From Drawing Lines in Melting Ice (The Economist, August 16th, 2007) —

Don Gautier, who works for that agency, retorts that it has never done a systematic study of the Arctic, or put a figure [like 25%] on its energy riches. But the United States and other Arctic nations are doing a survey now, and a clearer picture may soon emerge.

USGS East Greenland_2000 Perhaps the USGS never did say the words "25 percent," but they did do an assessment of the Eastern Greenland's potential in their 2000 world survey (chart left). Their results serve as a useful point of comparison with the 2007 study. The older evaluation gave a mean estimate of 47.148 billion barrels of oil and 80.709 billion cubic feet of gas in the onshore and offshore rift basins. There was an additional mean estimate of 4.170 billion barrels of natural gas liquids. If these estimates were close to accurate, it would be like finding a small Persian Gulf state in the North Atlantic. It's no wonder everybody's been so excited.

USGS East Greenlan 2007 The 2007 East Greenland evaluation is described in Assessment of Undiscovered Oil and Gas Resources of the East Greenland Rift Basins Province (chart left). This province was chosen to lead off the CARA project "because the area shares important characteristics with many arctic basins, including sparse data, significant resource potential, great geological uncertainty, and significant technical barriers to exploration and development." Sparse, potential, uncertainty, barriers—these are the keywords.

Before turning to the new 2007 assessment results, let's focus on how to interpret them and how they were arrived at. The USGS statistical mean estimates are the numbers policy-makers in the polar nations will see, and are apt to misinterpret, as they contemplate Arctic plunder made possible by anthropogenic climate change. The USGS makes estimates of undiscovered potential resources which have not been confirmed by drilling tests. They are not proved (also called P95) or probable (P50) recoverable reserves estimates of discovered oil that could be booked with the Securities & Exchange Commission, where a PN of V barrels means that there is an N chance of producing at least V barrels of oil. The USGS provides FN numbers, where F stands for fractile—see quantile. FN means there is an "an N chance of at least the amount tabulated." The USGS public report does not provide additional guidance to clarify interpretation of their estimates.

The USGS calls the geological areas under evaluation Assessment Units (AU). Each AU has an associated number between 0 and 1 indicating the probability that equivalent]" in that basin. For example, the USGS believes the oil F50 for the North Danmarkshavn Salt Basin AU is 1.989 billion barrels with an AU probability = 0.65.

It is remarkable how little information1 the USGS provides about how they got their East Greenland results. There is no easily available document that provides a detailed description of their methodology. Slide #7 in their East Greenland Shelf: Protoype for the USGS Circum-Arctic Resource Appraisal presentation (flash file) states that it was not possible to do a discovery history analysis, prospect counting, or reservoir modeling because "assessment techniques are limited in unexplored basins." What's left? A geologic synthesis and analog modeling. The precise meaning of these phrases is not clear. Slide #8 gives a flow diagram of equally vague terms.

It is important to provide an easy way to evaluate the USGS methodology. The gold rush in the Arctic is on. These USGS estimates will be cited for many years to come in order to justify all sorts of stunts or boondoggles—or worse. Omitting the documentation discourages independent evaluation of how these speculative numbers were arrived. If the numbers are hard to evaluate, then it is more likely that the USGS estimates will be reified, i.e. regarded or treated as if they have concrete or material existence. That's exactly what happened with the apocryphal "25 percent" number that surfaces in press accounts. The USGS estimates do not have a meaning independent of the theoretical framework that was used to calculate them.

The 2007 East Greenland assessment gives mean values of 8.901 billion barrels of oil, 86.179 trillion cubic feet of gas, and 8.121 billion barrels of natural gas liquids. The USGS presentation (slide #6) states that these estimates are subject to certain "future surprises (good & bad)." Apparently, bad surprises were also likely in 2000 when the first assessment was made, for there was considerably less oil & gas equivalent found this time around because of "new information made available through collaboration with the Geological Survey of Denmark and Greenland (GEUS), which significantly [changed] the geological understanding of the area." The 2000 East Greenland assessment found undiscovered resources of 65 billion barrels of oil equivalent, but only 31 billion barrels were found in 2007.

The new assessment provides some confirmation for the conclusions of a Wood Mackenzie study in November, 2006—the arctic is rich in natural gas but deficient in oil.

"These findings are disappointing from a world oil resource base perspective," said lead study author, Andrew Latham, Vice President, Energy Consulting at Wood Mackenzie.

The study shows only approximately one quarter of the oil volumes previously assessed in key North American and Greenland basins. Most importantly, the study reveals the Arctic to be a gas province, with 85 percent of the discovered resource and 74 percent of the exploration potential as gas.

The 2007 USGS results raised the amount of undiscovered gas in the East Greenland province compared with the 2000 assessment, but lowered the amount of oil considerably, from a mean of 47 billion barrels to 17 billion (slide #19, charts above). About half of this oil is thought to be gas liquids, as would be expected from a natural gas province. In North Danmarkshavn, one of only two basins with an F50 estimate > 0, the mean for the "largest undiscovered [oil] field" is 2.2 billion barrels, with a 5% chance of finding a field containing at least 7.4 billion barrels (slide #16).

Once again, optimistic forward-looking statements made in the past have been trumped by greater knowledge acquired since. It is the human tendency to make such statements that concerns many of those studying peak oil, for future liquids discoveries may not come close to fulfilling expectations set by participants at the Hedberg Research Conference or consultancies like Cambridge Energy Research Associates. USGS estimates of undiscovered resources, regardless of when they are made, must be taken with a grain of salt because "future surprises" may fail to satisfy hopeful projections.

In A Quest for Energy in the Globe’s Remote Places, tireless New York Times reporter Jad Mouwad praises the ingenuity of Norway's Statoil for getting the large Snohvit gas field on-stream this year, only 26 years after it was discovered. (See also Deconstructing the New York Times, ASPO-USA, April 18, 2007.) While conceding that developing Arctic resources will be tough, and certainly not cheap, the article suggests the possibility of an oil & gas bonanza in the polar regions that is just now getting underway. Don Gautier was quoted by CNN Money on October 25, 2006—

One study by the U.S. Geological Survey (USGS) said 25 percent of all untapped reserves in areas known to contain oil are found north of the Arctic Circle. That number could be even higher as the study didn't take into account unexplored regions, which most of the Arctic is.

"It's very likely there's a great deal of oil and gas out there," said Don Gautier, a research geologist at USGS who is leading an effort to put a number on those reserves. "The real possibility exists that you could have another world class petroleum province like the North Sea." [emphasis added]

Mouwad's tone, or Gautier's off-the-cuff remark, is irresponsible. There is no polite way to put it. When venerable, authoritative institutions like the New York Times or the USGS indulge public fantasies about tapping fossil fuel riches in the Arctic, wishful thinking and complacency become enshrined as conventional wisdom.

The development of Snohvit by Statoil was a technological triumph, but additional projects in the high northern latitudes are clouded by huge uncertainties or barriers to entry. Will the undiscovered resources of the Northeastern Greenland rift basins ever be exploited? The honest answer is that we don't know. We won't even know what the recoverable reserve volumes actually are until some intrepid oil company goes out there and drills some appraisal wells, but that will entail a big risk. It is a risk the world should not have to take. It's time to stop gambling with our future.

Contact the author at [the original article]

Note: My column will not appear next week because I am off to ASPO-USA's World Oil Conference. Hope to see you there—Dave


Notes:

1. There is no way of knowing, short of contacting Don Gautier, whether the 2000 assessment methodology was used, or modified in some way, for the East Greenland/CARA project. If some will think this represents laziness on my part, it does. I did not contact him because life 1) is short and 2) full of gratuitous suffering. Should it be necessary in future, I will get the details.

In fact, a term like "F50" means something very specific in the statistical algorithm the USGS employs to interpret its geological data in other cases. Here's a synopsis of that methodology used to assess Alaska's Central North Slope in 2005. (There is also a detailed description of the methodology there.)

Undiscovered oil and gas resources in each of 24 plays (assessment units) within the Alaska Central North Slope were estimated using a deposit simulation analysis in the assessment by the U.S. Geological Survey in 2005. Plays were identified by assessor geologists who specified geologic attributes, risks, and number of prospects for each play. From this information, sizes of oil and gas accumulations were simulated using a Monte Carlo algorithm. The number of such accumulations considered in a given simulation run was obtained from the distribution of the number of prospects. Each prospect in each successful simulation run was risked. This process yielded size-frequency distributions and summary statistics for the various petroleum categories. Estimates of resources from individual plays were then aggregated, and measures of uncertainty [e.g. F95, F50, F5] computed. [emphasis added]

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