Regional Report: The Arctic ///
Articles about the Arctic inevitably extol its virtues, citing estimates from the U.S. Geological Survey of more than 400 Bbbl of technically recoverable resources in the ice-bound region, Fig. 1. Close to 85% of these resources are estimated to be offshore, and thought to be principally gas. The Arctic is the last frontier, and soon, very soon we are told, the oil and gas industry will benefit hugely from its development. Some of this is undoubtedly true. Exxon Mobil and Shell have huge investments on Russia’s Sakhalin Island, and a number of operators have achieved success investing in Canada’s Atlantic waters offshore Nova Scotia and Newfoundland. But, elsewhere, the challenges loom larger. In Canada’s Northwest Territories, the offshore region is ostensibly open for exploration, but the conditions are sufficiently onerous that operators are uninterested. In Greenland, the new government has restricted the issuance of new offshore leases, and no one has yet demonstrated that Greenland has commercial potential. In Norway, Statoil postponed the Johan Castberg (Skrugard) development following tax hikes there. But nowhere is the situation more acute than in Alaska, where a combination of changing industry economics, a conflicted voter base, and an unhelpful U.S. administration are conspiring to strand a resource with comparable potential to the Gulf of Mexico.
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