EY has issued a report on Arctic oil and gas analyzing challenges to Arctic resource recovery and providing information about recent area activity and perspectives.
The region above the Arctic Circle accounts for only about 6% of the Earth’s surface area, but it could account for as much as 20% of the world’s undiscovered but recoverable oil and natural gas resources.
The existence of hydrocarbon resources in the Arctic has been known for decades, but only in recent years has the opening to full-scale resource development and navigation – such as the fabled Northwest Passage that would connect the Atlantic and Pacific Oceans, or the Northern Sea Route that will connect Europe and western Russia with eastern Russia and Asian markets – become technically and economically feasible.
In 2008, the United States Geological Survey (USGS) released the first-ever wide-ranging assessment of Arctic oil and gas resources, estimating the region’s undiscovered and technically recoverable conventional oil and natural gas resources.
Image Credit: EY report on Arctic oil and Gas, page 3
The USGS study estimated that the Arctic could hold about 13% of the world’s undiscovered oil reserves and as much as 30% of the world’s undiscovered natural gas reserves. Allocating the estimated resources/provinces to the nearest country (with “shared” provinces allocated equally), Russia is estimated to hold more than half of the total Arctic resources. Russia also holds the largest amount of natural gas resources, while the largest oil resources are in the US portion of the Arctic (Alaska).
Most critically, these high-cost and high-risk resources are increasingly commercially exploitable and affordable, given the current and expected prices of oil.
Image Credit: EY report on Arctic oil and Gas, page 3
Challenges to Arctic resource recovery
The quest for Arctic oil and gas resources is not for the faint of heart, nor for those with less-than-deep pockets. Rather, Arctic resource development is both high-cost and high-risk. More specifically, the major challenges include:
- Harsh climate
- Limited existing infrastructure
- Gas-on-gas competition
- Exceptionally long project lead times
- Spill containment/ spill recovery
- Overlapping/ competing economic sovereignty claims
- County- specific environmental laws/ regulations
More details may be found by reading the EY report on Arctic Oil and Gas
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