Beneath the disappearing Arctic ice lies a bounty that could change up the energy game
In spite of the concern among environmentalists, scientists and others about the havoc being wreaked on local ecosystems by melting ice in the Arctic, the most insistent message about climate change among the politicians and energy industry officials speaking at the Arctic Frontiers conference in Tromso recently might be summed up as “Bring it on!”
This positive, even optimistic, outlook on the projected impacts of global warming in the High North—an area that is warming more rapidly than anywhere else on Earth–runs in opposition to what the majority of environmentalists and scientists say is developing there. And why? Because under the thawing ice there is a bounty that could create abundance on many levels around the planet.
Steiner Vaage, president of ConocoPhillips Europe and Chair of the Norwegian Oil and Gas Association, expressed this contrary sense of optimism as siccinctly as anyone. “The global middle class is growing by 80 million people each year,” he said. “The world is constantly in need of more transportation and power generation. We believe the future will require even more energy sources, including in the Arctic.” Mead Treadwell, Lieutenant Governor of energy-rich Alaska, added, “The Arctic is a resource that can truly feed and fuel the world.”
It must first be clarified that defining the Arctic is in itself a taxing proposition. It is most often defined, geographically, as the area north of the Arctic Circle (latitude 66 degrees, 32 minutes North, according to the National Snow and Ice Data Center). But using that as the demarcation would leave out a large portion of Greenland and several ice-covered stretches of Canada. There are researchers who define it as north of the tree line, where the icy wastes cannot support vegetation. But the Arctic must be defined in political terms as much as in scientific. For example, some national leaders at the conference stated that 4 million people live in the Arctic, while others maintained 9 million live there.
There is at least one thing that everyone, at least, everyone at this conference, seemed to agree on. They concur that the High North is home to a rich trove of natural resources that will soon be up for sale to the highest bidder. It is estimated that 13 percent of the world’s undiscovered petroleum lies in the Arctic, as well as 30 percent of the world’s undiscovered natural gas, as was noted by Vaage of ConocoPhillips In the Arctic region roughly 84 percent of the development of the total undiscovered reserves s expected to occur offshore, according to the U.S. Geological Society.
As of now, the majority of the offshore oil and gas activity is explorative. There are offshore activities currently taking place in eastern Canada, Russia’s Sakhalin, and the portion of the Barents Sea belonging to Norway. Nearly all of the eight members of the Arctic Council, including the United States, have already begun extracting or are making plans to extract resources from there. China is working tirelessly to be granted permanent observer status on the Council so that it can inject more political and financial influence in its search for rare earth minerals and fossil fuels in Greenland and other parts of the region.Alaska, too, is producing from offshore fields, but primarily through extended reach from shore or from artificial islands, according to Rystad Energy, an Oslo-based research firm. Royal Dutch Shell has been drilling pilot holes into the seabed of Alaska’s Chukchi Sea since last September. However, its Kulluk oil rig ran aground in hurricane-like conditions on New Year’s Eve. While no oil was spilled, the mishap has triggered an outcry among environmental groups and caused the company’s plans–and any others’ plans for offshore oil drilling in Alaska’s Arctic – to be put on the back burner.
The polar regions have been exploited for onshore oil and gas production for some years, with fields in Siberia and Alaska’s North Slope. But the big players in the energy game are eyeing possible greater bounty offshore in the future as the Arctic, warming faster than any other region on the planet, is at last open for business.
Of course, a more tempered picture of the opportunities for an economic boom from a thawing Arctic is being presented by many at the conference. “An interesting thing happened on the way to the oil and gas boom,” said Heather Conley, a senior fellow and director of the Europe Program at the Center for Strategic and International Studies in Washington. She refers to the latest efforts in discovery and extraction of unconventional shale gas in North America, which comes due to the controversial process called hydraulic fracturing or “fracking”. This controversial process has expanded production and allowed prices of natural gas to drop making arctic hydrocarbons less cost competitive. “Oil and gas may not be the big Arctic story.” Conley says, and like some others at the conference, she seems convinced that mineral development will most likely play a more substantial role in the future in the Arctic.
Rystad Energy is expecting that natural gas developments in the Arctic will not be in competition, economically, with onshore shale gas. The firm has already predicted that any development is unlikely before 2030, possibly even further out, according to Jarand Rystad, founder and managing partner of Rystad.
In recent months, several major energy projects scheduled to start or already started in the Arctic have been shelved for the time being. For example, Russian President Vladmir Putin announced last August that the state-owned energy company Gazprom would be terminating a $15 billion expansion of its flagship Shtokman gas field, located in the Barents Sea. He blamed soaring production costs for the project’s ending, along with falling gas prices due to the North American boom, plus dwindling demand from Europe’s suffering economies. Another example of dwindling interest, Statoil, the Norwegian energy company, has halted production at its Snohvit (which translates to Snow White) gas field, also in the Barents Sea, offshore from Hammerfest, the world’s northernmost town. Statoil and its partners decided that there was not sufficient gas to justify further investment as this is Norway’s first energy project in the Arctic.
There is little doubt that the Arctic, with its hidden riches, will continue to lure nations and indigenous communities as melting ice makes those riches more accessible. But the so-called “race” to tap and cash in on its resources is looking more like a stroll than a sprint, at least for the next few years. Environmentalists argue that time will be necessary to ensure that the extraction of the region’s natural riches, especially those offshore, doesn’t risk an environment already stressed to its limits..
“Accidents will happen, and rhe Arctic is not a forgiving place,” says Martin Sommerkorn, the coordinator of climate change activities for WWF’s Arctic Network Initiative, in an interview during the conference. “These are mistakes we can’t allow ourselves to make. We must tread carefully in order to not repeat the past. In terms of marine development of oil and gas, we’re not there yet.”