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Frozen frontiers for oil and gas explorations

Arctic region

This post is the 600th since I began may blog in May 2008. Some of my readers may have been with me from the beginning but for some this may be the first time they read it. If you are reading the English version then you should know that Michael Lardelli does 99% of the translations from Swedish for that. At the moment there are about 1,500 people around the world who read the blog each week and, in total, there are about 4,000 visits per week. My readers are very important to me and I feel a responsibility to inform you of things that I think are important to raise in the energy debate. What shall I write for my 600th blog?

Last Thursday I happened to be reading the Financial Times and they had an article with the title, “Frozen Frontiers”. It was about the Arctic Council. The nations included in the Arctic Council are those with territory above the Arctic Circle and one of those is Sweden. The others are Finland, Norway, Denmark, Iceland, Canada, the USA and Russia (Artic Council). One of the reasons that I was interested in the article was that, at the moment, Sweden holds the chair of the Arctic Council for the period 2011-2013. Of course, the article also discusses future exploration for oil and gas in the Arctic under the subheading, “The rapid melting of Arctic ice is unleashing a scramble to exploit vast oil and gas deposits”. Sweden’s aims as chair of the council are described in this way, “During its chairmanship, Sweden will promote negotiation by the Arctic States of a tool for prevention, preparedness and response when extracting oil in the Arctic in order to safeguard the region. To justify development in this sensitive area, it is important that it takes place in accordance with the conditions that are characteristic of the region. Sweden will therefore lead the work on drafting guidelines for responsible entrepreneurship in the Arctic, which are based on existing internationally agreed guidelines on corporate social responsibility (CSR).”

Arctic region

(Larger map)

But let’s return to the article in FT before we continue to discuss gas and oil production in the Arctic. If one studies a map of the area we can see the Arctic Circle but another boundary that is important is that of the economic zone for each nation that is 200 nautical miles out from a nation’s coast. This means that the North Pole itself is in international waters and there is currently a discussion about how this area will be divided up. Any nation can submit an application to increase its economic zone and so far only an application by Norway has been approved. The boundary between Norway and Russia is also established so that there is no reason for conflict in that area. The greatest opportunity to discover oil is thought to be off the coast of Alaska and the eastern parts of Russia. Russia wants to extend its economic zone to the North Pole but that request has not been approved. You might remember that, with the aid of a submarine, Russia placed its flag on the seabed at the North Pole.

The fact that the summer ice is declining in the Arctic means that there is now also the possibility to take ships northwest and northeast of Greenland (seen from Europe) and the famous Northeast Passage goes through Russian territorial waters. Some judge that the risk for conflict there will grow and there are those who love to propose conflict-scenarios between Russia and the USA. Conflict over the demarcation of boundaries and shipping lanes is one possible scenario but all the parties in the area assure each other that everything will be solved peacefully.

When it comes to gas and oil the FT article referred to an analysis published by the United States Geological Survey (USGS) in 2008 that I sometimes include in my presentations. The USGS studied the continental shelves in the Arctic and tried to extrapolate characteristics to these from areas further south. For the area around Greenland they took the characteristics from offshore of Russia and applied them there. Consequently, the chances of finding oil around Greenland were judged to be high and we can read that the UK company Cairn Energy spent a billion dollars but only drilled dry holes. The optimistic estimates made by the USGS may cost the oil companies huge amounts of money. Shell is making large investments offshore of Alaska which is regarded as the best prospect but it remains to be seen what they find.

When we read Sweden’s aims for its tenure as chair of the Arctic Council we see that they want to negotiate “a tool for prevention, preparedness and response when extracting oil in the Arctic in order to safeguard the region”. We can read that the Arctic Council will make a decision on this in May. There may be reasons to return to discussion of this issue after that.

The largest discovery of natural gas in the Arctic is Russia’s Stockman field. Russia has been planning production from Stockman for many years but when the USA began to produce shale gas the intended market for the gas disappeared. The main question is how much oil one can really find in the Arctic. The world consumes 30 billion barrels per year which is as much oil as has been found in Norway’s territory including the North Sea. I think that they will find less than that in the Arctic. It is clear to me that we should not risk damaging the Arctic’s unique environment for only one year’s oil consumption. The oil companies should take this to heart.

What do you think? Leave a comment below.

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