Arctic Prospective Oil Resources

In a world desperately thirsty for oil, the Arctic and its resources seems a very appealing option. With increasing demand for oil and increasing prices, there has been higher interest shown regarding the Arctic on the global scale. In 2008 US Geological Survey estimated that the are north of the Arctic Circle has 90 billion barrels of undiscovered, technically recoverable oil and 44 billion barrels of natural gas. This represents 13% of the expected undiscovered oil in the world (USGeological Survey, 2008).

The Arctic Circle appears to encompass 6% of the Earth’s surface, one third of which is found above sea level and another one third is in continental shelves beneath less than 500 m of water. The rest is deep ocean basins historically covered by ice (Gautier, 2009). Deep oceanic waters are known to have low oil potential at the moment but the continental shelves of the Arctic potentially have very high recoverable oil hidden within them. Until very recently the Arctic was seen as a very remote and technically difficult region to access with high costs of oil recovery. Whilst low-cost recovery oil was still widely available, little exploration was done in the Arctic. Some offshore wells have been drilled such as those in Mackenzie Delta, the Barents Sea, offshore Alaska and the Sverdrup Basin but even these were seen as economically unsustainable and hence were abandoned (Gautier, 2009).

However now there is an increasing interest in the Arctic due to various factors. Firstly after decades of substantial ice melting, the Northwest east passage can become a viable transportation route hence the Arctic becomes more accessible following the major decline in ice cover since 1987 (Harsem, 2011). Secondly in 2007 Russia planted a deep sea flag at the North Pole- Arctic region as an important evidence of leadership of the Kremlin. Third oil prices increases push for new discoveries to sustain high demand for oil. Finally in 2008 US geological study stated that about ¼ of the world’s undiscovered oil is probably located in the Arctic.

The exploration of the Arctic oil is still considered more technically challenging than any other environment. The USGS estimates that 84% of the oil and gas there is located offshore which means it is more difficult and expensive to recover than the oil and gas from onshore oil fields. Furthermore the US Geological Survey (USGS) did not consider economic factors such as the effects of permanent sea ice or oceanic water depth in its assessment of undiscovered oil and gas resources (USGeological Survey, 2008). Nevertheless all these difficulties don’t seem to scare the northern countries in the race to obtain these territories with the aim of exploration them for resources. The four Arctic countries- Russia, US, Canada and Norway are already looking to expand their activities in the Northern region whilst Iceland and Greenland are looking at becoming oil and gas producers. Figure 1 below shows the oil fields that are assessed by the USGS in their 2008 report about the Arctic oil. It is obvious that with oil being as highly valued resource as gold, new formations and the right of exploration could create major geopolitical conflicts between the countries involved. It is especially worrying as Russia and USA are involved- historical opponents and competitors against each other so perhaps we have a worry of another cold war approaching!? Russia has already landed some deep sea flags in the area to try and claim the northern territories.

Figure 1.

Source: USGS, 2008. Location of Arctic Basins assessed by the USGS.

Whilst little research is done to this day regarding the Arctic, its resources and whether they are economically sustainable to recover, evidence seems to suggest that the region certainly has a fair amount of unexplored resources buried under the surface. All of the northern countries that have potential access to the area are currently undertaking research into the area and its resources. Perhaps the Arctic oil is our solution to the problem of scarcity of oil and will push the peak oil point further away from what it could be otherwise hence oil is a worry for a very distant future. Also perhaps it could mean that non-conventional oil resources do not need to be explored just yet meaning high costs and likewise renewable energy is not the only solution.