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 The Arctic contains just over a fifth of the world's
undiscovered, recoverable oil and natural-gas resources, according to a
long-awaited review released Wednesday, confirming its potential as Big
Oil's final frontier.
A report by the U.S. Geological Survey found that the
area north of the Arctic Circle has an estimated 1,670 trillion cubic
feet of natural gas – nearly two thirds the proved gas reserves of the
entire Middle East – and 90 billion barrels of oil.
The report, the culmination of four years of study, is
one of the most ambitious attempts to assess the Arctic's petroleum
potential. One of its main findings is that natural gas is three times
more abundant than oil in the Arctic: and most of that gas is
concentrated in Russia.
The survey reflects growing interest in an area once
off-limits to oil exploration that has become more accessible as global
warming reduces the polar icecap, opening up valuable new shipping
routes, oilfields and mineral deposits.
But any attempt to create an Arctic drilling frenzy
will likely meet strong resistance from environmentalists worried about
the impact on what is still a near-pristine wilderness. And it could
trigger a flurry of territorial disputes over who really controls the
oil and gas under the Arctic seabed.
The USGS survey, which brings together disparate data
held by individual countries as well as new information from geologists
working in the field, is the first time anyone has produced a
comprehensive, publicly available estimate of the Arctic's hydrocarbon
treasures.
Its conclusions will be read closely at a time when
concerns about future supply are driving up crude prices to
astronomical heights. But scientists cautioned that it'll take decades
to develop the Arctic's hard-to-get-at oil and natural gas.
"It will not ratchet up global production like a new
Saudi Arabia," said Donald Lee Gautier, a USGS geologist who played a
key role in the survey, known as the Circum-Arctic Resource Appraisal.
"These are additions that will come over time."
Exploration in the area north of the Arctic Circle has
already unearthed more than 400 oil and gas fields. They account for
about 40 billion barrels of oil and more than 1,100 trillion cubic feet
of gas, the USGS said.
But large parts of the Arctic, especially offshore,
remain unexplored: the presence of near permanent sea ice makes it
almost impossible to acquire seismic data and drill exploratory wells.
Climate change is opening up the region's potential,
however. The North-West Passage, home to deadly ice floes that can
crush ships, was ice-free last summer: some predict it will turn into a
new trade route between Europe and Asia and a channel that oil
companies can use to ferry workers, equipment and supplies around more
freely.
Enticed by the promise of vast deposits, energy
companies are flocking northwards – often because they have few other
places left to go. The Arctic, especially offshore Alaska and northern
Canada, is one of the few parts of the world where the majors can
easily acquire exploration acreage. Elsewhere, soaring crude prices
have prompted oil-rich states to renegotiate contracts and sometimes
kick out western oil companies altogether.
Earlier this year, Royal Dutch Shell PLC spent more than $2 billion acquiring drilling leases in Alaska's Chukchi Sea. Last year, Exxon Mobil Corp and Imperial Oil Ltd of Canada bid nearly $600 million to win a big exploration block in Canada's Beaufort Sea. BP PLC will spend $1.5 billion to develop Liberty, an oilfield off the northern coast of Alaska.
Yet drilling in the Arctic is controversial. Shell has
been forced to delay a drilling plan off northern Alaska because of a
legal challenge from environmental groups who say it could harm local
whale and walrus populations.
Oil exploration might also be hampered by rising
nationalism. The five circumpolar states - Canada, Russia, the U.S.,
Norway and Denmark - are now scrambling to claim new territory in the
central Arctic Ocean. Last August, a Russian submarine planted the
country's flag on the seabed 14,000 feet under the North Pole. Shortly
afterwards, Canadian Prime Minister Stephen Harper announced the
country's military presence in the Arctic would be beefed up.
The rhetoric stems from disagreements over who has
sovereignty over the North Pole. Russia rests its claim on the theory
that two underwater mountain chains that cross the Arctic Ocean, the
Lomonosov and Mendeleev Ridges, are in fact extensions of its
continental shelf. Denmark disputes that. A UN body that rules on such
claims has recommended additional research.
Mr. Gautier, the U.S. Geologist, said one of the
survey's main conclusions was that a lot of the gas in the Arctic is in
Russian waters, in places like the South Kara Sea and South Barents
Basin. These are both geological extensions of onshore areas that are
rich in gas.
The presence of so many hydrocarbons there "will
reinforce Russia's global dominance in natural gas resources," he said.
Russia is already the world's largest producer of natural gas and sits
on the world's biggest gas reserves.
Yet there's little likelihood that much of Russia's
Arctic wealth will be exploited any time soon. The country still has
vast untapped fields onshore that are first in line to be developed.
Development would also be hampered by Russia's likely
reluctance to let in foreign companies with experience developing oil
and gas riches in hostile environments like the Arctic. Some firms have
been allowed in, but only as junior partners of state-controlled
Russian entities like OAO Gazprom.
The situation could change in the future, though. Neil
McMahon, an oil analyst at Sanford Bernstein, says Russia will come
under mounting pressure to sell offshore leases to western companies
and use the cash to boost investment in flagging domestic oil
production. ' Source
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