Countries moving geopolitically on Arctic energy, Wilson forum told

Countries already are making geopolitical moves to secure Arctic oil and gas resources despite actual development being decades away in most cases, experts agreed at a Woodrow Wilson International Center for Scholars forum.

China, India, Japan, and South Korea all have observer status on the Arctic Council so they can keep close track as member countries discuss issues, said Mikkal Herberg, a senior lecturer on international and Asian energy at the University of California at San Diego’s Graduate School of International Relations and Pacific Studies.

“The Arctic opening feeds into Asia’s very serious energy concerns,” he observed during the Jan. 29 event. “The notion of more oil and gas supplies coming from someplace besides the Middle East is attractive to them.”

Russia, meanwhile, can be expected to turn from pipelines to tankers to export its oil and gas into new markets because water-borne vessels are more economic than long-distance pipelines, Herberg said. “The flow of oil and gas to China would be good for both countries, although Russia may wonder how much it wants to feed this economic force that has become a behemoth,” he said.

Many countries already have an Arctic policy that address boundary issues, according to Jim Slutz, president and managing director of Global Energy Strategies LLC and a board member of the Wilson Center’s Canada Institute, which held the forum to launch a new book, “In Search of Arctic Energy.”

Slutz said, “All understand the need to balance science and environmental management to work in the Arctic. Cooperation with native groups also is essential. It will be necessary to provide a good quality of life for indigenous populations.”

‘Rich, but fragile’

“This truly is an extraordinary part of the globe we call home,” said Rebecca Ranich, a former director of Deloitte Consulting LLP’s Federal Energy & Resources Management practice who spent several years in the Russian Arctic. “It’s a rich, but extremely fragile, location.” Economics, geopolitics, and investment economics driven by changing business models will all matter, she predicted.

Although the US is scheduled to assume the Arctic Council’s presidency in 2015, the federal government is not moving quickly to develop policies, participants generally agreed. Alaska, meanwhile, is proceeding aggressively, a state official said.

“Alaska has been in the oil and gas business longer than the US has had a space program,” said Kip Knudson, Alaska’s state-federal relations director. “It’s not new territory for us. Oil revenue supplies 90% of total state revenue.”

Arctic energy resource discussions should not discount global climate change and its impacts, suggested Joel Darmstadter, a senior fellow at Resources for the Future. New policies scenarios in many government forecasts reduce fossil energy’s role significantly by 2040, he said.

“We have not moved very far in limiting carbon emissions,” Darmstadter said. “Undiscovered Arctic oil and gas resources would only add to this carbon burden.” It’s unrealistic to expect every hydrocarbon resource to be produced, he added. “We need the capacity to look at the implication of continued use of one or another kind of fuel,” he said.

Slutz noted that shale energy, deepwater and offshore resources, and potential Arctic supplies will compete for US attention. Opening the Arctic would take a long time with progress occurring incrementally in any case, he said. “Identifying and solving issues will take a long time,” he said, adding, “The market will determine how quickly it occurs.”

Contact Nick Snow at nicks@pennwell.com.

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