Slowing The Arctic Hydrocarbons Drive
BMI View: Unlike many countries with Arctic territory, Greenland's incoming government will buck the trend by holding off on the issuance of new exploration licences. Given the lack of commercial exploration success in Greenland , despite the promise of hydrocarbon s , the lack of new licences will not be significant for the industry as it continues to wait for better drilling results from ongoing exploration campaigns.
Greenland will buck the current trend and will hold off on issuing new licences for its Arctic waters. Its new minister for natural resources, Jens-Erik Kirkegaard, stat ed that the incoming government - a recently elected three-party coalition led by the social democratic Siumut (Forward) party - would be 'reluctant' to increase the number of exploration licences from the 20 currently available. This is in line with Siumut's stance when it ran in the March elections; party leader Aleqa Hammond had advocated the restriction of foreign investment and resource extraction in the run-up to the election ( see our online service, March 13 2013, 'New Government More Cautious On Foreign Investment' ).
However, this policy diverges from a growing trend in countries w here maritime territory stretches into the Arctic Ocean , as they seek to tap the rich pool of hydrocarbons on offer in the Arctic. Norway has made a who p ping 72 blocks i n the Barents Sea available for bidding under its 22nd licensing round ( see 'Barents Raises Production Outlook ', June 27 2012 ) , while Russia continues to award more Arctic licences to speed up the search for oil and gas in the region ( see 'Fight To Liberalise Arctic Shelf Rumbles On', February 7 2013 ). Iceland has also entered the race to tap potential resources in its Arctic waters, having put up two licensing rounds thus far ( see 'Faroe And Valiant Take On Icy Waters', December 6 2012 ). Greenland is diverging from this trend in choosing to halt the issuance of new licences.
A Green Land For Oil And Gas Search
A 2008 US Geological Survey (USGS) estimates that the Arctic, often referred to as the last untapped frontier, could hold about 90bn barrels (bbl) of undiscovered crude oil and 46.7trn cubic metres (tcm) of undiscovered natural gas - or about 22% of the world's undiscovered conve ntional oil and gas resources. Growing energy demand and the need to find new sources to replace depleted oil and gas fields have seen interest in the Arctic grow considerably in recent years. The melting of the Arctic ice and high oil prices are also raising the commercial viability of hydrocarbons extraction in the Arctic ( see 'Arctic Riches Attract IOCs, But Rigid Regulations Remain', March 7 2013 ).
|Top Of The World|
|Countries With Maritime Territory In Arctic Waters|
Risked potential reserves offshore Greenland (including East Canada) could amount to 51.3bn barrels of oil equivalent (boe). While a moratorium on new licences could see the territory lose out on growing industry interest, the impact on Greenland may be smaller than expected.
|Greenland's Black Gold|
|Risked Potential Reserves (bn boe)|
Companies such as the KANUMAS group (a joint venture comprising ExxonMobil, Statoil, BP, Japan National Oil Company, Chevron and Shell) and Cairn Energy are active in Greenland. However, results from exploration have been disappointing. For example, Cairn's gamble has cost the firm US$1.14bn in exploratory drilling but it has failed to find commercial oil and gas. The firm has subsequently moved to reduce its exposure to Greenland in favour of 'safer' assets (see 'Cairn Looks To De-Risk Upstream Portfolio With North Sea Acquisition', April 3 2012).
This shows that for all its promise, Greenland remains an unproven frontier play, which increases the already substantial risks of operating in the treacherous Arctic environment. Firms could do well to wait for further results from current exploration programmes before moving to acquire more licences. In this regard, Cairn's drilling campaign across its existing 11 offshore licences in 2013 and 2014 will be watched keenly. It will also allow the new government to appease a population that is increasingly wary of foreign exploitation of its resources and the ecological damage to its pristine environment.