Talks aim to avert Arctic oil rush

Talks aim to avert Arctic oil rush

By Robert Anderson in Stockholm and Carola Hoyos in London

Published: May 27 2008 18:22 | Last updated: May 27 2008 18:22

Five Arctic powers are holding a summit in Greenland on Wednesday to forestall a confrontation over the Polar region’s mineral resources and discuss how to protect its fragile environment.

When Russia planted its flag on the seabed 4km under the North Pole last August it raised fears of a rush to grab the Arctic’s mineral resources, particularly its oil and gas deposits, which could total up to a quarter of the world’s undiscovered reserves.

Denmark called a summit in Ilulissat to try to calm tempers and reiterate their joint commitment to the UN’s Law of the Sea Convention that governs territorial waters. Most countries have sent their foreign ministers to the meeting, an indication of how seriously they take the issue.

In the future, rising global temperatures could leave much of the Arctic ice-free in the summer, enabling easier exploration and opening up the North-west passage from the Atlantic to the Pacific. Soaring oil prices and improved technology also make exploration more viable.

Russia, Canada, Norway and Denmark (through the semi-autonomous territory of Greenland) are all collecting evidence to show their continental shelves extend towards the Arctic and that therefore their territorial waters should be extended beyond 200 miles offshore. The US has not signed the UN convention, making it impossible for it to even lodge a claim.

“I hope the meeting will send a clear political signal that the Law of the Sea is sufficient to sort out all the legal issues in play,” said Peter Taksoe-Jensen, undersecretary for legal affairs at the Danish foreign ministry.

Commercial interest in exploiting the Arctic is hotting up. Denmark recently attracted the likes of ExxonMobil and Chevron, the two biggest US energy groups, along with several smaller players, to explore off its western coast. Alaska, meanwhile, garnered aggressive bidding by Royal Dutch Shell, Europe’s biggest energy group, which earlier this year won the right to explore the remote part of the state’s Arctic North Slope.

Russia has promoted the development of its Arctic resources by appointing Total, the French oil major, as its partner for the giant Shtokman gas field. And on Tuesday the country’s lawmakers moved forward a bill that would cut exploration taxes for companies venturing into risky areas, including its Arctic regions of Yamal and Timan-Pechora.

All these are indicators that the industry is getting serious about the Arctic, said David Parkinson, analyst at Wood Mackenzie, the industry consultants. Wood Mackenzie’s recent report found that the Arctic basins, including those already being developed, hold 233bn of discovered oil and gas and another 166bn that has yet to be found, the vast majority of it gas.

But much of the potentially commercial gas is unlikely to be produced before 2050 due to export constraints, the report found.

And those assessments do not even include the more remote area, which is the one under dispute, meaning the oil industry has much land – or ice – to cover before getting into the legally murky waters.

“There are an awful lot of basins within that area that have not even been explored yet,” said Mr Parkinson, adding that the commercial development of the furthest reaches of the Arctic was “a long way out”.