Dr Drill on the case in the search for oil at new frontiers
Another Arctic hunter has gone for the winter, but will return. Oil-drilling rigs hired by the Scottish oil company Cairn stopped work before the sea began to freeze over.
Exploration during the brief summer season this year was tantalising: indications of oil and gas in two wells. As yet, there is no commercial find. But now that a "petroleum system" has been proved in this vast area, big enough to hold three North Seas, other companies know that a major strike is just a matter of time - and Greenland is only one of the new frontiers emerging in the search for oil.
We keep hearing that "there is nowhere left to look for oil" and "all the big fields have been found". Yes, many parts of the world have been thoroughly explored, but a decade of high oil prices has encouraged a return to frontier wildcatting, the buccaneering end of a staid industry. Where else should bold chief executives and smart investors be looking?
Explorers are turning to three main areas. The first are those frontiers, such as Greenland, which have until recently been technically too challenging or too remote. Melting ice in the Arctic because of global warming, and experience gained in areas such as Russia's Sakhalin Island, Norway's Barents Sea and eastern Canada's "Iceberg Alley", have given the industry confidence that it can operate in these frigid waters.
Similarly, the British-ruled Falkland Islands, off the coast of Argentina, have attracted a rush of small companies, with one significant discovery so far by the UK's Rockhopper, named after a penguin. Conditions here, though, are more moderate, similar to those in the North Sea.
Instead of going north, others are going deeper. The great success story is Brazil, whose "pre-salt" play lies some 2000 metres below the sea surface, then beneath 5,000 metres of rock and salt.
The recent Libra discovery, one of a string of giants found by the state oil company Petrobras and its partners, could double the country's reserves. Brazilian-listed rivals such as OGX have also done well in shallow waters.
Other new deepwater provinces include offshore China, the eastern Mediterranean, perhaps the Black Sea and, once the Mexicans get their act together, their side of the Gulf of Mexico, so prolific in US waters.
Secondly, we have the "moose pasture" - areas long ago written off by conventional wisdom. Of course, conventional wisdom is often right. Some small oil companies who listed on London's less-regulated AIM market downplayed the risks and over-hyped the success case.
As experienced geologists say, no matter how good a new area looks "only Dr Drill knows for sure". The consequent destruction of value damaged the sector in investors' eyes.
But some companies have achieved startling success in west and east Africa. The respectability of frontier exploration was restored by Cairn, famous for its success in India's Rajasthan, and Tullow, listed in London, which has found giant fields in offshore Ghana, and had a string of hits in landlocked Uganda.
Anadarko, the large US corporation, has taken up the baton by striking oil and gas in deepwater Mozambique and Sierra Leone. A host of smaller, emerging neighbours will challenge the African oil giants of Nigeria and Angola.
Geologists' reconstructions of the ancient continent of Gondwanaland, which split apart when the Atlantic opened, separating Africa and South America, hints that the success in Ghana could be repeated in once-adjacent Suriname and that the pre-salt oil in Brazil might have its counterpart in Gabon, Congo and Angola.
Third are areas off-limits for political reasons until recently. It was no surprise that Kurdistan, almost ignored during the Saddam Hussein era, was rich in oil: as one villager from the northern settlement of Zakho said: "All we knew is that the cows and sheep kept getting stuck in the stuff."
But with an almost unbroken success rate and several multibillion-barrel discoveries, the Kurdish region has exceeded expectations. Miran West, one of the largest finds, was made by Heritage Oil, which recently sold its share of the Uganda fields to Tullow.
Frontier exploration should not be over-sold. Many companies will find nothing, or their discoveries will be too small, take a long time to develop, or be beset by political problems, as in the ongoing dispute over rights to export Kurdish oil.
The star of the early 2000s, Mauritania, has suffered from complicated geology and a drastic decline in production.
Some areas, such as the Arctic, are environmentally sensitive, with concerns about the endangered polar bear, and fears of oil spills in these sensitive waters. Cairn was confronted by Greenpeace protests, which were strongly condemned by the Greenlanders themselves.
Yet the costs of developing new frontier fields are not prohibitive: Petrobras thinks pre-salt oil would be commercial at US$30 per barrel. We are only in the dawn of exploring deep-water, pre-salt, interior Africa and the Arctic.
Like the polar bear, the oil companies and their investors just need patience and the sense to know where to look.
Robin M Mills is an energy economist based in Dubai and the author of The Myth of the Oil Crisis and Capturing Carbon
Updated: November 30, 2010 04:00 AM