The Arctic is the world’s smallest ocean, and possibly the most resource-rich one. Beneath its icy waters lie not just conventional hydrocarbons – possibly 25% of the total remaining reserves – but unconventional ones such as gas hydrates, plus a huge range of minerals, including precious ones like platinum and palladium.
Who owns this massive bounty? This is a highly contentious subject, with the circum-arctic states all jostling for the best position in a sophisticated land grab. Serious Arctic exploration will perforce be limited until these territorial disputes are resolved.
There are so many issues involved. The geological chance of finding hydrocarbons in large quantities is good, but the risks involved in extracting them safely and economically without damaging the environment are immense. On top of this are the technical, political and economic challenges of getting the oil and gas to the energy-hungry markets many kilometres further south.
The new realities of the present low oil price world also have a bearing on this. What was potentially feasible at +$100 oil is laughable at $50. The well-known unpredictability of oil prices is particularly relevant, as exploiting Arctic resources takes much longer than in less environmentally challenging and sensitive areas: Snøvit in the Norwegian Barents Sea, for example, was discovered in 1981 and finally came on stream in 2007. Cost will be the determining factor in the if, when and where of Arctic oil and gas production. Partnership models, such as the ExxonMobil/Rosneft collaboration which discovered the world’s most northerly field last year, may well be the way ahead, sharing both the financial strain and the technological innovation. Collaboration, not competition – if politics permits.
The main objection from many quarters to exploiting the Arctic’s resources is not the cost, nor the technological and logistical challenges, nor the ongoing territorial disputes. It is the possibility of damaging a unique, pristine environment. We have other sources of hydrocarbons, and of energy, so should we be exploiting the Arctic at all?
Jane Whaley
Editor in Chief
