The timing of oil and natural gas development in the Arctic, estimated to hold 22% of the world's undiscovered conventional oil and gas resources, has grown less predictable with massive discoveries of gas in the world's shales.
The potentially vast shale gas resource adds uncertainty to the timing of Arctic development, already daunting due to the gas-prone nature of the Arctic resource, extreme Arctic risk and expense, unresolved sovereignty claims, and environmental protection safeguards.
These are among the conclusions of a study released by the US Energy Information Administration of the 6% of the earth's surface above the Arctic Circle that falls in eight countries: Canada, Denmark (Greenland), Finland, Iceland, Norway, Russia, Sweden, and the US.
The prospect of recovering 5,000 to 16,000 tcf of shale gas in more accessible geologic provinces could defer Arctic development generally, although growing European gas demand may be a strong incentive for Russian Arctic gas development, EIA concluded.
Large Arctic discoveries began at Tazovskoye in Russia in 1962 and at Prudhoe Bay in the US in 1967.
EIA tallied 61 large oil and gas discoveries above the Arctic Circle in four countries, 43 of them in Russia. Fifteen of the 61 were found in the 1970s-80s and are undeveloped due to the expense. Thirteen of the 15 are in North America.
The US Geological Survey released mean estimates in 2008 of an Arctic undiscovered resource of 90 billion bbl of oil, 44 billion bbl of natural gas liquids, and 1,670 tcf of gas, 84% of it offshore (OGJ, Aug. 4, 2008, p. 17). That study of 25 geologic provinces left eight other provinces unassessed as being too minor.
The three largest Arctic provinces account for 65% of the total resource, and the top 10 for 93%. The high concentration might reflect that little if any exploration has occurred in the low-estimate provinces. The Arctic resource mix is judged to be 78% gas and NGL.
The estimates embody considerable uncertainty, even for the two assessment units in the province judged to hold the largest Arctic resource, the West Siberian basin.
Eurasia has 63% of the Arctic resource base and North America 36%, and the Eurasian base is 88% gas and gas liquids while the North American side has 65% of undiscovered Arctic oil. Three North American provinces have 54% of the Arctic's total undiscovered oil resource: Arctic Alaska, the Amerasia basin just north of Canada, and the East Greenland Rift.
Even without the shale gas proliferation, the Arctic presents imposing development hurdles.
Denmark, Canada, Norway, Russia, and the US have overlapping economic sovereignty claims in Arctic waters. Some claims stem from a 1982 United Nations convention that permits countries to claim as much as 350 nautical miles beyond the point where sea depth exceeds 8,200 ft of water, EIA pointed out.
Duplicate claims exist, for example, between Denmark and Russia in the Arctic Ocean, Norway and Russia in the Barents Sea, and Canada and the US in the Beaufort Sea.
Development impediments include harsh weather, poor soil conditions, no summer access, facilities damage and supply hindrance from ice, long supply lines, and higher worker inducements.
One study found Alaska North Slope onshore development costs to be 1.5-2 times as expensive as a similar project in Texas, but costs and risks can be significantly greater due to long lead times, lack of infrastructure, supply chain delays, weather, and court challenges.
This suggests "that only the world's largest oil companies, mostly likely as partners in joint venture projects, have the financial, technical, and managerial strength" to tackle the Arctic, EIA said.
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