Watching Government: Arctic resource contradictions

July 23, 2012
Arctic offshore oil and gas resources extend beyond North America, experts reminded their audience at a July 12 forum at the Woodrow Wilson Center for Research.

Arctic offshore oil and gas resources extend beyond North America, experts reminded their audience at a July 12 forum at the Woodrow Wilson Center for Research. They noted that Russia, Norway, Greenland, and Iceland also see potential and challenges beneath their far northern waters.

"There's a lot going on here, but there's also a lot of hype," observed Charles Emmerson, a senior research fellow in the energy, environment, and development program at Chatham House in London. "It's a lot more complicated and uncertain than many people say."

He said that in talking about Arctic oil and gas development, it's important to remember there's not one Arctic, but many.

"There are many geologic basins and political divisions. There can areas where gas and oil already are produced, and others which are virgin territory," Emmerson explained. "In some places in the Arctic, we've actually been here before. History has shown us that simply having resources does not mean they will be produced."

Russia wants to develop more of its energy resources, according to Julia Nanay, a senior director at PFC Energy in Washington, DC. President Vladimir Putin sees the country's 10.2 million b/d of oil production rivaling Saudi Arabia's output, and would like to see new fields developed, she said.

More gas than oil

"The Arctic is one way to produce more oil, but it's likely to produce more gas," Nanay said. "The government is focused on providing tax concessions for offshore development. Russian companies don't have a lot of experience there, and if you look at the Sakhalin where Exxon and Shell are major investors, both projects would not have happened without international oil companies coming in."

Jed Hamilton, a senior Arctic consultant at ExxonMobil Upstream Research Co., said about 240 billion boe has been discovered already in the Arctic, with significant additional potential. He also suggested that gas resources there aren't likely to be developed because tight shale supplies elsewhere are easier to reach.

Fixed production platforms that resist ice flows operate in as much as 100 m of water, he said. "Beyond that, you have to use floating systems, and that's where technological extensions are needed," Hamilton said. "Economic oil accumulations appear possible outside the Arctic's near coastal zones. That's what we hope to develop."

Robert Johnson, director of Eurasia Group's oil and gas practice, said oil and other Arctic resources remain difficult to produce. "It's important to remember that projects can take up to 35 years to begin producing," he said. "Oil and gas is a high-tech value-added industry which creates good jobs. The niche of Arctic class technology needs to be more seriously considered."

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About the Author

Nick Snow

NICK SNOW covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He retired from OGJ in January 2020.