The Arctic is not the Answer

Greenland’s ice-caps may be melting at an alarming rate due to climate change, but that is not stopping the country issuing further oil and gas licenses. Twelve companies have advanced to the prequalification stage under the country’s latest licensing round.

Greenland is offering eight blocks covering about 92,000 sq km for exploration off Central-West Greenland. “Greenland is near proven hydrocarbon systems”, said one consultant at the recent Petex oil industry conference in London. The country plans to launch a second phase of its licensing round in August next year.

The Arctic has long been seen as the “final” frontier for the oil industry, but a recent report found has found that its potential might not be as great as people once thought. A joint study by oil industry consultants Wood Mackenzie and Fugro Robertson, entitled the “Future of the Arctic,” was published earlier this month.

The study found the Arctic potential is significantly less than previous estimations had suggested, and the mix of resources have been found to contain much less oil and more gas.

“These findings are disappointing from a world oil resource base perspective,” said lead study author, Andrew Latham, Vice President, Energy Consulting at Wood Mackenzie.

The study shows only approximately one quarter of the oil volumes previously assessed in key North American and Greenland basins. Most importantly, the study reveals the Arctic to be a gas province, with 85 percent of the discovered resource and 74 percent of the exploration potential as gas.

“This oil:gas mix is not ideal because remote gas is often much harder to transport to markets,” explained Latham. “In addition, export and technology constraints are expected to delay production of a large portion of the commercial gas until 2050,” he said.

Under the most likely scenario, it is projected that production from the Arctic will contribute some 3 million barrels of oil equivalent per day (mboepd) liquids and 5 mboepd gas at peak, with the proportion of production from US basins lower than previously anticipated.

“This assessment basically calls into question the long-considered view that the Arctic represents one of the last great oil and gas frontiers and a strategic energy supply cache for the US,” stated Latham.

Just another reason to diversify away from oil now.