Mon, Jun 23, 2014 page15

• Oil giants lay hopes on untapped Russian Arctic

  COLD COMPETITION: The recent World Petroleum Congress in Moscow focused attention on potential fossil fuel reserves drawing international attention

  • AFP, MOSCOW
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  Tens of degrees below zero during winter and home to endangered species and remote infrastructure — the Russian Arctic is emerging as a new promised land for oil companies, despite clear obstacles.

  “The Arctic is one of the world’s largest remaining regions of undiscovered conventional oil and natural gas resources,” ExxonMobil chief executive Rex Tillerson said during a major industry conference in Moscow two weeks ago.

  Tim Dodson, a senior executive at Norwegian group Statoil and who also was speaking at the World Petroleum Congress, said the Arctic “is one of the very few remaining areas with the potential to make huge discoveries.”

  

  A visitor views a 3D image of an ocean drilling platform at a coporate pavilion during the 21st World Petroleum Congress in Moscow, Russia, on Monday last week.

  Photo: Bloomberg

  More than 20 percent of the world’s hydrocarbon reserves yet to be discovered are thought to be situated in the Arctic, according to a 2008 report by the US Geological Survey government agency.

  Such reserves are predicted to be located primarily in Russia, stretching from Western Siberia to the extreme east of the country.

  While Tillerson emphasizes that the Arctic “is not unfamiliar territory” for the oil industry — large fields have been explored and exploited for decades in Alaska, the north of Norway and in Russia’s Sakhalin region — Dodson is quick to point out the challenges.

  “The climatic conditions are probably the most visible challenge. Ice, snow, cold and darkness all contribute to an environment that can be both hostile and beautiful,” Dodson said. “To unlock the full potential of the Arctic and also to make Arctic projects commercially viable and globally competitive, we need new technology and innovative business models.”

  Oleg Mikhaylov, vice president for oil and gas production at Russian group Bashneft, said that exploration of the Russian Arctic “would require significant support from the Russian government, in addition to investments by private corporations.”

  “If you envision full-scale development of the Arctic, you have to envision moving millions of tonnes of supplies to one of the most remote regions of the world,” he said.

  Mikhaylov said this would require expansion of railroad infrastructure and the building of a network of ports, in addition to other major constructions.

  Global warming has in recent times caused the Arctic ice cap to melt and open new navigation routes leading to previously inaccessible raw materials.

  Yet there are clear risks and according to Mikhaylov, dealing with an oil spill offshore in the Arctic “would be an even more daunting challenge” than the 2010 BP oil disaster in the Gulf of Mexico.

  Environmental groups such as Greenpeace are eager to highlight such threats, occasionally putting themselves in danger to do so.

  Russian security forces in September last year detained 30 Greenpeace activists and journalists and seized their Arctic Sunrise ship following protests against an offshore oil rig owned by Russian energy giant Gazprom.

  The 30, including four Russians, were detained for about two months before being bailed out. Eventually, they benefited from a Kremlin-backed amnesty.

  Nongovernmental organizations such as Greenpeace claim that Arctic oil and gas exploration not only harms a fragile ecosystem — home to endangered species such as polar bears and cetaceans — but also accelerates climate change.

  Faced with such obstacles, energy companies need to achieve technological breakthroughs or see the high costs associated with such exploration potentially end certain Arctic projects, analysts and industry leaders said.

  For now, though the drilling continues.

  For example, Statoil is in the process of designing a new class of drilling ships, specially adapted to withstand extreme Arctic weather conditions.

  Meanwhile, French group Total has for a number of years worked with Gazprom to find a cost-effective way of exploiting the giant gas field of Shtokman in the Barents Sea.
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