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Useless cold wars over treasures deep within the Arctic

The sands of the Libyan desert are the locus for conflict around oil installations, but might the struggle for resources shift to the Arctic?

"Some say the world will end in fire, Some say in ice", as the American poet Robert Frost put it. Currently, the sands of the Libyan desert are the locus for conflict around oil installations, but might the struggle for resources shift to the Arctic?

Admiral James Stavridis, the supreme Nato commander for Europe, thinks so. He warned last year that the lure of oil could cause the polar regions to slip "down the icy slope towards a zone of competition, or worse a zone of conflict".

And Russia's 2009 national security strategy explicitly raises the possibility of using military force to defend its Arctic interests. In 2007, mini-submarines planted a Russian flag on the seabed at the North Pole, staking Vladimir Putin's claim in the style of a 16th-century conquistador.

Even Denmark and Canada have managed to tangle over Hans Island, a barren rock slightly larger than Dubai Mall, sending naval forces to the area.

For most of history, it has not been necessary to define territorial claims in this frozen wasteland. Onshore production in Alaska and west Siberia goes back to the 1960s, but only recently have higher oil prices, and the retreat of the ice cap under the onslaught of global warming, made offshore Arctic resources economically viable.

The US Geological Survey estimates potential for 134 billion barrels of oil (about as much as Iran's reserves) and 1,670 trillion cubic feet of gas (more than Russia's reserves).

At the start of this month, Norway's Statoil rekindled the interest of petroleum geologists by finding some 250 million barrels of oil and gas at the Skrugard prospect in the Barents Sea. This expanse of chilly waters runs from the North Cape, Europe's farthest extremity, up to the glacier-bound islands of Svalbard, kingdom of the polar bear, at 78 degrees north.

The Barents Sea has long had tantalising but unfulfilled promise. A long string of exploration wells yielded only two discoveries, which waited decades for development in these harsh conditions. Now Skrugard will revitalise exploration in Norway's far north.

"We have confirmed that our exploration model is correct," says Tim Dodson, the vice president for exploration at Statoil.

Across the Russian border, in the eastern Barents, Shtokman, one of the world's largest gasfields, was discovered in 1988. Although reserves in this one field are more than half of the total for the UAE, it still awaits development because of endless procrastination by the Russians over the western partners they prefer, the current weak gas markets and the development's vast cost, technical challenges and environmental sensitivity.

And BP's agreement with state-owned Rosneft to explore the remote and chilly Kara Sea has struck a legal iceberg in the shape of BP's difficult Russian oligarch partners.

Shell's attempts to drill in the Chukchi and Beaufort seas north of Alaska have been held up by legal and environmental challenges. With only a short summer window for drilling, each delay means waiting through another six months of the polar night.

As with the rest of its offshore resources, the US is locked in a limbo that benefits no one. Its continuing failure, largely over conservative arguments about sovereignty, to ratify the UN Convention on the Law of the Sea further hampers it, preventing it from agreeing on its borders with Canada and Russia.

So the feverish claims of a new "gold rush" are negated by the glacial progress to date.

Armchair analysts, with their alarmist speculation over oil wars, seem to have overlooked that by far most of the Arctic's oil and gas resources lies within uncontested areas. One of the most prospective areas, the eastern Barents, was settled by a reasonable compromise between Norway and Russia last April, so fears of a war between Canada and Greenland may be overstated.

Although Arctic oil and gas reserves are likely to be substantial, they will not be a windfall along the lines of Middle East petroleum. One billion barrels in Abu Dhabi or Kuwait, costing a few dollars to extract, has a very different value from 1 billion barrels under the Greenland ice floes.

The remaining disputed area is below water up to 4km deep, covered by a permanent ice cap, and 1,000km from the nearest landfall. It looks unlikely to be prospective for oil and gas, and even if it is it will be hugely costly to develop, with the start of exploration probably decades away.

Instead of the macho posturing of planting flags and launching warships, the polar nations would do better to make use of the real resources to which they already have firm legal claim. International co-operation is needed for oil and gas development in this remote area, not least to minimise environmental risks.

Wars, whether of weapons or words, guarantee Arctic resources will remain on ice.

 

Robin Mills is an energy economist based in Dubai, and the author of The Myth of the Oil Crisis and Capturing Carbon

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