Offshore in Depth
The Russian military and Vladimir Putin got plenty of tabloid coverage in April, when they launched a virtual tour of the recently erected “Trefoil” base in the Franz Josef Land archipelago above the Arctic Circle. Apparently straight out of a James Bond movie, the three-winged prefabricated structure, painted to match the Russian flag (Fig. 1), is the barracks and control center for a 150-man garrison, armored vehicles and several fighter jets. The Russian news agency announced that five copies of the Trefoil base would be positioned along the country’s northern coast to counteract “NATO aggression.”
The new, photogenic base comes after an already significant military buildup in the Arctic by Russia, which has reopened 14 airfields and 16 deepwater ports that had lain dormant since the demise of the Soviet Union. The Russians have 40 active ice breakers (compared to one functional ice breaker for the U.S.) and have recently activated four combat brigades for Arctic service.
Northern shipping routes. What explains this militarization? Climate change is one reason. Specifically, the polar ice has been melting to such an extent each summer, that some predict the Arctic will be a “blue ocean” within a decade, and the Russians want to control the sea lanes along its northern coast. A passage kept open by icebreakers, the Russians believe, could compete with the Suez Canal.
This premise was confirmed last summer, when a cargo ship from Norway taking the northern route to China reached its destination 18 days sooner—while saving $300,000 in fuel costs—compared to a voyage through the Mediterranean and the Suez.
By the way, the 1,070-passenger Crystal Serenity cruise ship took the Northwest Passage from Anchorage to New York, with stops in Greenland, on a 32-day voyage last summer. You can get your ticket for the 2017 cruise for $21,885.
Oil is the big prize. The big prize of the Arctic, of course, is the oil and gas reserve base. The U.S. EIA estimates that undiscovered resources beneath Arctic waters hold 90 Bbbl of oil, 1,700 Tcf of natural gas, and 44 Bbbl of NGL. (More than 100 Bboe are off Russia’s coast).
To develop its reserves, Rosneft has turned to Western companies like Exxon Mobil for technology, financing and project management expertise. In 2011, Exxon Mobil agreed to invest $3.2 billion and jointly develop three blocks in the Kara Sea and the Tuapse Trough License block in the Black Sea. Subsequently, the agreement was expanded to include seven more blocks in the Russian Arctic.
The first well of the partnership, spudded in August 2014, discovered an estimated 733 MMbbl of oil and 11.9 Tcf of gas. Just before Rosneft announced these results, the Russian Army invaded Crimea, and the U.S. and Europeans imposed economic sanctions. By mid-October, Exxon Mobil’s operations and technical cooperation with Rosneft were shut down. Exxon Mobil has estimated that the suspension of the agreement has cost it “no more than $1 billion.” Its 2017 application to resume work in the Black Sea block was denied in April by the U.S. State Department.
Meanwhile Rosneft has continued its exploration efforts in the far-north Laptev Sea, and plans to invest $4.4 billion in Arctic and Black Sea exploration through 2021.
Destabilized Arctic. Russia’s militarization of the Arctic is destabilizing for the region, which largely has been characterized by cooperation between Russia, Norway, the U.S., Canada and Denmark for scientific research and environmental protection. The Arctic Council, formed in 1996 and based on the framework of the UN Convention on the Law of the Sea, is an intergovernmental forum that has fostered communication and trust. Even during high-level disagreements between governments, the Arctic Council has facilitated low-level cooperation, for example, between the U.S. Coast Guard and its Russian counterparts.
Inevitably, according to Heather Conley of the Center for Strategic and International Studies (CSIS), great power politics have a way of destabilizing contested regions like the Arctic.
Freedom of navigation. Republican U.S. Senator Dan Sullivan of Alaska, speaking at a January CSIS event in Washington, likened Russia’s buildup in the Arctic to China’s construction of artificial islands, to claim sovereignty over the South China Sea. A member of the Senate Armed Services Committee, he outlined the U.S. strategy to respond to the Russian moves.
Sen. Sullivan said that the U.S. has an interest in maintaining freedom of navigation in the newly open Arctic waters for both civilian and military vessels. The U.S. needs to invest in infrastructure, including a new strategic Arctic port. The U.S. Coast Guard has requested six new icebreakers, and the Navy needs Arctic-class ships.
Sen. Sullivan also proposed development of U.S. oil and gas resources—24 Bbbl of oil and 108 Tcf of gas—beneath the Beaufort and Chukchi seas. Once leasing of these areas is permitted by the new administration, the challenge will be to find companies that will make the investment and sanction the resources for the difficult task of Arctic offshore exploration, which has frustrated operators like Shell, as recently as 2015The Russian military and Vladimir Putin got plenty of tabloid coverage in April, when they launched a virtual tour of the recently erected “Trefoil” base in the Franz Josef Land archipelago above the Arctic Circle. Apparently straight out of a James Bond movie, the three-winged prefabricated structure, painted to match the Russian flag (Fig. 1), is the barracks and control center for a 150-man garrison, armored vehicles and several fighter jets. The Russian news agency announced that five copies of the Trefoil base would be positioned along the country’s northern coast to counteract “NATO aggression.”
The new, photogenic base comes after an already significant military buildup in the Arctic by Russia, which has reopened 14 airfields and 16 deepwater ports that had lain dormant since the demise of the Soviet Union. The Russians have 40 active ice breakers (compared to one functional ice breaker for the U.S.) and have recently activated four combat brigades for Arctic service.
Northern shipping routes. What explains this militarization? Climate change is one reason. Specifically, the polar ice has been melting to such an extent each summer, that some predict the Arctic will be a “blue ocean” within a decade, and the Russians want to control the sea lanes along its northern coast. A passage kept open by icebreakers, the Russians believe, could compete with the Suez Canal.
This premise was confirmed last summer, when a cargo ship from Norway taking the northern route to China reached its destination 18 days sooner—while saving $300,000 in fuel costs—compared to a voyage through the Mediterranean and the Suez.
By the way, the 1,070-passenger Crystal Serenity cruise ship took the Northwest Passage from Anchorage to New York, with stops in Greenland, on a 32-day voyage last summer. You can get your ticket for the 2017 cruise for $21,885.
Oil is the big prize. The big prize of the Arctic, of course, is the oil and gas reserve base. The U.S. EIA estimates that undiscovered resources beneath Arctic waters hold 90 Bbbl of oil, 1,700 Tcf of natural gas, and 44 Bbbl of NGL. (More than 100 Bboe are off Russia’s coast).
To develop its reserves, Rosneft has turned to Western companies like Exxon Mobil for technology, financing and project management expertise. In 2011, Exxon Mobil agreed to invest $3.2 billion and jointly develop three blocks in the Kara Sea and the Tuapse Trough License block in the Black Sea. Subsequently, the agreement was expanded to include seven more blocks in the Russian Arctic.
The first well of the partnership, spudded in August 2014, discovered an estimated 733 MMbbl of oil and 11.9 Tcf of gas. Just before Rosneft announced these results, the Russian Army invaded Crimea, and the U.S. and Europeans imposed economic sanctions. By mid-October, Exxon Mobil’s operations and technical cooperation with Rosneft were shut down. Exxon Mobil has estimated that the suspension of the agreement has cost it “no more than $1 billion.” Its 2017 application to resume work in the Black Sea block was denied in April by the U.S. State Department.
Meanwhile Rosneft has continued its exploration efforts in the far-north Laptev Sea, and plans to invest $4.4 billion in Arctic and Black Sea exploration through 2021.
Destabilized Arctic. Russia’s militarization of the Arctic is destabilizing for the region, which largely has been characterized by cooperation between Russia, Norway, the U.S., Canada and Denmark for scientific research and environmental protection. The Arctic Council, formed in 1996 and based on the framework of the UN Convention on the Law of the Sea, is an intergovernmental forum that has fostered communication and trust. Even during high-level disagreements between governments, the Arctic Council has facilitated low-level cooperation, for example, between the U.S. Coast Guard and its Russian counterparts.
Inevitably, according to Heather Conley of the Center for Strategic and International Studies (CSIS), great power politics have a way of destabilizing contested regions like the Arctic.
Freedom of navigation. Republican U.S. Senator Dan Sullivan of Alaska, speaking at a January CSIS event in Washington, likened Russia’s buildup in the Arctic to China’s construction of artificial islands, to claim sovereignty over the South China Sea. A member of the Senate Armed Services Committee, he outlined the U.S. strategy to respond to the Russian moves.
Sen. Sullivan said that the U.S. has an interest in maintaining freedom of navigation in the newly open Arctic waters for both civilian and military vessels. The U.S. needs to invest in infrastructure, including a new strategic Arctic port. The U.S. Coast Guard has requested six new icebreakers, and the Navy needs Arctic-class ships.
Sen. Sullivan also proposed development of U.S. oil and gas resources—24 Bbbl of oil and 108 Tcf of gas—beneath the Beaufort and Chukchi seas. Once leasing of these areas is permitted by the new administration, the challenge will be to find companies that will make the investment and sanction the resources for the difficult task of Arctic offshore exploration, which has frustrated operators like Shell, as recently as 2015. 
