This Could Become The Most Promising Arctic Oil Basin

I described last month how one country on the planet recently bucked the trend of declining petroleum drilling: Ireland, which saw a record number of bids for offshore acreage in November. 

And this week, one of the neighbors of that rising oil and gas hotspot turned in another strong bid round.

Alaska Facing Tough Choices Without Arctic Oil

The disappointing exploration results in the Chukchi Sea for Royal Dutch Shell was a huge blow to the company, and will set back oil development in the Arctic indefinitely. After spending $7 billion and eight years, walking away with nothing is hard to stomach.

But, Shell can always go elsewhere. Shortly after Shell announced that it was scrapping its entire Arctic Alaska campaign, Reuters reported that Shell won a bid to explore for oil and gas in the Black Sea in Bulgarian waters. An exploration deal could be finalized in October.

Searching for Leads in the Opening Arctic

ABOARD THE COAST GUARD CUTTER HEALY, IN THE ARCTIC–When you plow into a 4-foot-thick chunk of sea ice at 3 knots, even in a 16,000-ton state-of-the-art icebreaker like the U.S. Coast Guard cutterHealy, it’s hard not to notice. The whole ship shudders and seems to lurch sideways. Metal cabinets rattle. Californians swear it sounds and feels just like an earthquake, with deep rumbling booms and tremors. Others say it’s like hitting turbulence on a jetliner, the shivering and rattling accompanied by the overdrive whine of 30,000 horsepower. If you’re down in the galley, right on the waterline, what you hear is the nerve-wracking scraping of shattered ice along the side. Five stories up, on top of the bridge, you feel the bump of the collision over the strain of the engines pushing the ship through a sea of drifting white, blue, and dirty gray ice.

Norway still optimistic over Arctic oil

The drastic fall in oil prices has made petroleum explorations in the Barents Sea seemingly unprofitable. Yet, despite severe economic, technological and environmental concerns, the Norwegian government pushes for increased activities, and recently handed out exploration licenses in the Barents Sea.

The huge fall in global oil prices since June from $115 to around $50 has dramatically lowered cost-margins in the volatile petroleum industry. After 5 years of stable high prices, the recent fall in oil prices is attributed to several reasons: sluggish economic output, the shale gas revolution in the US, a switch to alternative fuels, and finally the unwillingness of OPEC and the Saudis to sacrifice their market share by cutting productions.

What On Earth Are We Doing Looking For Oil In The Arctic?

Shell is back in; Statoil is pensive, but eager; and Russia is pushing ahead. Low prices have stunted exploration, but the Arctic is still a hotbed (read: marginally warm-bed) of activity. With so much to lose in the fragile and costly environment, why are we there?

One – albeit simple – answer numbers around 90 billion or 1,670 trillion depending on your business. The United States Geological Survey estimates that the area above the Arctic Circle holds 90 billion barrels (bbl) of undiscovered, technically recoverable oil and 1,670 trillion cubic feet of technically recoverable natural gas. That’s good for 13 percent of the undiscovered oil and 30 percent of the undiscovered natural gas in the world. Still, it’s not easily accessible – or easy to market – with most of the hydrocarbons occurring under the inhospitable and often frozen Arctic seas.

Russia's Plans for Arctic Supremacy

Elements from the Russian Army's Guards Engineer Brigade and Engineer Camouflage Regiment train in Arctic conditions, Jan. 19, 2011. (RIA Novosti/Wikimedia)

Although the crisis in Ukraine continues to focus attention on Russia's western border, Moscow is seeking to exploit a more lucrative prize along its vast northern frontage: the Arctic Circle. Melting ice has opened up new transit routes and revealed previously inaccessible oil and mineral deposits. Facing a year of harsh economic constraints, securing exploitable energy reserves remains a top priority for Moscow. The planned militarization of the Arctic is already underway, and funding is secured through 2015 (the Ministry of Defense was the only Kremlin ministry not to be curtailed in the most recent budget.) With Russia aiming to consolidate its strength by the end of the year, surrounding countries are already reassessing their positions in the face of an overwhelming regional force. 

Is The Arctic Dream Dead?

The Arctic offshore will be drilled; it’s only a matter of time. However, the dream to have commercially viable production in the immediate future may very well be dead. Continually slumping oil prices are the primary suspect, but they don’t tell the whole story of what is a complex demise.

The Arctic is awash in hydrocarbons. It is estimated to hold 90 billion barrels (bbl), or 13 percent, of the world’s undiscovered conventional oil – 30 bbl are thought to reside in Alaska’s Arctic region. The figure is even higher for the world’s undiscovered conventional natural gas at 30 percent, the majority of which lies in Russia’s West Siberian and East Barents Basins. In all, 84 percent of the Arctic’s undiscovered oil and gas is believed to occur offshore.

Can the Arctic Reshape Global LNG Shipping?

Rising global temperatures are melting Arctic sea ice, so much so that some companies are now viewing the Arctic Ocean as a major shipping route for energy supplies.

The Wall Street Journal published an article on July 9 that detailed a joint venture between two major Asian companies seeking to ship liquefied natural gas (LNG) through the Arctic Ocean. Mitsui OSK of Japan and China Shipping Development Company announced a combined investment of $932 million on three LNG carriers that could handle the rough icy waters of the far north.

This Week in Energy: April D-Day for Alaska’s Massive Gas Plans

Alaska stands at an interesting energy crossroads, with the State Legislature considering the fate of a massive liquefied natural gas project that would be an economic boost for the state and a new supply boost for Asian markets hungry for US LNG. The State Legislature session ends on 20 April and approval is by no means a foregone conclusion: Some Alaskan lawmakers don’t like the deal, which they say panders to oil companies at the expense of the state.

The project will cost between $45 billion and $65 billion and is backed by giants Exxon Mobil, BP and ConocoPhillips. It envisions transporting Alaskan North Slope gas 800 miles across the state to a new LNG plant on the south coast. The pipeline project is hoping to be green-lighted in full in 2018, but first it has to get past the state legislature. As the plan stands now, the state will take a 20-25% stake in the project and as such foot the bill for $10 billion of the project’s cost, with TransCanada potentially putting up half that amount.

DENMARK: ‘Liberals warn against China’s arrival in the Arctic’

Former finance minister and leader of the liberal Venstreopposition party, Claus Hjort Frederiksen, has warned against China’s ambitions in Greenland. In recent months, several Chinese companies have begun exploration projects or negotiations with a view to operating — either independently or in partnership with Western companies — mineral mines on the island.

The Resource Race: China Dips Toes in Arctic Waters

AP/ Xinhua

Christoph Seidler  

China is hungry for natural resources, and the Arctic is home to a wealth of them. Growing alarm about its ambitions has led Beijing to take a softer approach, stressing exploration and research over exploitation.

The Arctic Environmental Security

Global warming and the increased human activity in High North are changing the Arctic environment causing melting of the ice cap and higher air temperatures.[1] The changes in the Arctic environment put under threat the whole Arctic ecosystem and rise serious environmental security concerns regarding the maintenance of the local and the planetary biosphere.

PERSISTENT ORGANIC POLLUTANTS

In recent decades the Arctic temperature has raised as much as 3.5ºC during winter months. Various persistent organic pollutants (POPs)[2] and other contaminants[3] are transported by air to Arctic were they are deposited in the ice through precipitation or deposition.[4] Contaminants are also carried to Arctic by ocean and river discharges. According to the 1997/98 AMAP assessment of pollution in Arctic, POPs were present in parts of the region where there was no human activity to explain the contamination. This piece of evidence confirmed that the northern polar region served as a sink for pollutants that had been transported over long distances.[5]

The Newly Emerging Arctic Security Regime

By the end of the Cold War, the Arctic entered into an era of substantial demilitarization and cooperation[1]. Both the US and Russia dissipated their Arctic forces, albeit the US remained the most military capable Arctic power[2]. Following the two superpowers, the other Arctic nations all took immediate steps to utilize the “peace dividend”.[3] Mutual reduction of the deployed forces and the elimination of the Arctic based exercises were at the forefront of their agenda.[4] 

During the 90s the Arctic affairs were monopolised by low politics issues, such as environmental protection and fishery patrols.[5] In fact, joint policies such as the Arctic Military Environmental Cooperation Program (AMEC)[6] among Norway, Russia and the US were launched as a result of the growing international environmental concern over the abandoned Russian nuclear submarines.[7] Cooperation among the Arctic nations was also broadened both by the establishment of the Arctic Environmental Protection Strategy and the Arctic Council.[8]

US far behind in race for Arctic assets

There is a battle at the top of the world for oil and minerals, and many observers of this competition in the Arctic believe the United States is lagging far behind.

“In some ways, we’re not even in the race,” said Alaska’s Lt. Governor Mead Treadwell. 

THE HISTORICAL BACKGROUND OF THE ARCTIC TERRITORIAL DISPUTES UNDER THE REALIST PERSPECTIVE

The rivalry over the Arctic territory is undoubtedly a game of power. In such a game “new territories are conquered, held, assimilated, and serve as a starting point for new advance”.[1]  Territorial claims over the Arctic region are traced to 1920, where the littoral states began to claim territory based on the so called ‘sector principle’.[2] The latter appeared as a unique opportunity for expansion to the north. The Arctic states were claiming all land territory within sectors based on their coastline between the outermost limits towards neighbour states and straight longitude lines to the top at the North Pole.[3] However, the principle was not a rule of international law and found little support in states’ practice.[4] For more than sixty years, the Arctic states were engaging in sovereignty disputes for predominance mainly over the Northwest Passage, the Northeast Passage, the Beaufort Sea and the Northern Continental Shelf. Throughout that period the absence of a common regulatory mechanism made the balance of power in the region fragile, since the pressures from the anarchic international environment towards balancing and against cooperation were reinforced by the relativity of power.[5] It is noteworthy that throughout the Cold War realism was a “plea for statesmen and, above all, US and Soviet leaders, to recognize the need to coexist in a world of opposing interests and conflict”.[6]