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Preparing for the Arctic rush, Part 2

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Oilfield Technology,

In the past year, there have been both discoveries and setbacks in the Arctic. Operating in this highly diverse and complex region requires a combination of advanced technology, viable economics and political will. Bradd Libby, DNV GL, Norway, elaborates.


Political support

All of the Arctic territories are heavily dependent on income from resource extraction. The NPD estimates that approximately 50% of Norway’s national export revenues and one-quarter of government revenues come from oil and gas. In Russia, Arctic deposits account for as much as 70% of the country’s total hydrocarbon reserves. The industry generates at least one-half of Russian government revenue. In Alaska, that figure is 90%.2

Leona Agulukkaq, Canada’s recently appointed Minister of the Environment, made it clear in a speech at the Fram Museum in Oslo in early September that Canada’s focus as Chair of the Arctic Council, which lasts until May 2015, will be on protecting the Arctic environment while promoting economic development that benefits people who live in the Arctic.

Elections in 2013 in both Norway and Iceland that favoured right-leaning parties also bode well for development activities on the Norwegian Continental Shelf (NCS) and south of Jan Mayen. The Obama Administration’s 2013 ‘National Strategy for the Arctic Region’ states flatly that Arctic drilling “aligns with the United States‘ all-of-the-above approach to developing new domestic energy sources.” And as Charles Emmerson wrote in The Future History of the Arctic, “In the eyes of the Kremlin, producing Russia’s Arctic resources is not a choice, it is a strategic necessity.”

It is not simply the lure of major finds that is attracting interest northward; Arctic nations are also getting pushed north by declining production at lower latitudes. North Sea production peaked in 2000. Production over the entire NCS is now down by half since then and is rapidly declining. UK volumes are down about two-thirds. Alaskan output, which peaked in the late 1980s, is now about one-quarter of what it used to be, raising concerns about maintaining the minimum flow necessary to operate the TAPS. As Alaskan crude production fell behind Texas, North Dakota and California, so too did the state’s clout in Washington.

In June 2012, all of the blocks the Norwegian government offered for petroleum exploration were in the Barents and Norwegian Seas. The next round of licensing, which ends in January 2014, invites exploration proposals in the former disputed area of the Southeast Barents. Though Norwegian politicians claim by their ‘High North - Low Tension’ strategy that there is no ‘race’ for Arctic resources, seismic exploration began in the former disputed region the day after Norway’s parliament approved the delineation agreement.

One of the biggest deterrents to production in the Arctic might simply be easier resources elsewhere. In the past decade, new major hydrocarbon reserves have been discovered everywhere from Brazil to Kazakhstan, Cyprus, Myanmar and Tanzania. Even in the mature North Sea, the estimated 3 billion bbls of the newly discovered Johan Sverdrup field sit just 100 miles offshore, surrounded by ample existing infrastructure. New technologies, from the current wave of hydraulic fracturing, horizontal drilling, deepwater operations, and software developments to future ones including subsea production (see June 2013 Oilfield Technology) benefit Arctic projects by opening up possibilities, reducing costs and helping to manage risk, but also threaten them by doing the same things elsewhere.


Part 1 of this article can be reached here.

Part 3 of this article can be reached here.

Adapted by David Bizley

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