Emerging Frontiers: The Arctic Frontier

President's column One of the oil and gas industry’s most talked about emerging frontiers—but perhaps least understood in terms of familiar metrics—is the Arctic region. The Arctic refers to a portion of the globe above 66.5o N latitude that is roughly the size of Africa. Encompassing about 6% of the Earth’s surface, the Arctic consists of about one-third land, one-third continental shelf, and one-third waters deeper than 500 m (Budzick. 2009). The Arctic contains portions of eight countries: Canada, Denmark (Greenland), Finland, Iceland, Norway, Russia, Sweden, and the United States. I cannot imagine any other region on Earth this large that has had so few efforts to explore for, develop, and produce hydrocarbons. Arctic History Indigenous people of the Arctic have known for centuries about oil seeps along the coastal plains, and even used pitch as a sealant on canoes. Back in 1789, oil seeps along the Mackenzie River, located within Canada, were reported by Russian settlers in Alaska (Bishop. 2011). Shell geologists first investigated Alaska’s oil potential in 1918. Sub-arctic oil was first discovered in Canada’s Northwest Territories in the 1920s. Russian geoscientists began exploring northern Siberia during World War II, and made their first major oil and gas discoveries there in the early 1960s (Bishop. 2011). The first US federal lease sale on Alaska’s North Slope was held in 1958, and the first offshore lease sale in the Beaufort Sea in 1979. From the 1960s through the late 1980s, oil was discovered at Prudhoe Bay, gas was discovered in the Barents Sea, and the first exploration wells were drilled in the US Chukchi Sea. After a period of inactivity due to low oil prices, exploration resumed in Canada’s Mackenzie Delta region in 2000, and in the US portion of the Beaufort Sea in 2005. The 5-month 2010 US moratorium on new deepwater drilling had an adverse impact on US Arctic drilling activity, and political and environmental opposition to Arctic exploration has been tougher since the moratorium was lifted, both in the US and elsewhere. Nevertheless, due to growing demand and declining production from mature oil fields worldwide, international operators and governments have been initiating new Arctic exploration activities. This past summer, Norway opened a new area in the southeastern Barents Sea to offshore drilling. The service sector is following. Schlumberger and Baker Hughes, for example, opened new bases in the Norwegian town of Hammerfest, on the 71st parallel. Size of the Prize Any estimate of Arctic hydrocarbon resources suffers from considerable uncertainty, due to the limited amount of data from wells drilled throughout this enormous region. In 2008, the US Geological Survey completed the Circum-Arctic Resource Appraisal. The study estimated total undiscovered conventional hydrocarbon resources of 90 billion bbl of oil, 1,669 Tcf of natural gas, and 44 billion bbl of natural gas liquids—a total of 412 billion BOE. That constitutes about 30% of the world’s undiscovered gas and 13% of the undiscovered oil (Bishop. 2011).

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