The Telegraph: If We Don’t Find Oil in the Ice, then Russia Will

September 9, 2014

The race is on to drill for oil in the Arctic, as energy companies and Russia's Vladimir Putin eye the prize in the world's last great frontier for resources exploration, writes The Telegraph.

Forget the North Sea and the Middle East, it is the frozen oceans of the Arctic which are the next great frontier that big oil companies plan to exploit over the coming 15 years.

The Arctic region, which crosses several national boundaries including Russia, Alaska, Norway and Greenland, is thought by energy consultants Wood Mackenzie to hold an estimated 166bn barrels of oil equivalent in terms of reserves.

 “There aren’t that many places left on the planet that are on the kind of scale as the Arctic in terms of possible resources for the oil companies to go at,” Andrew Latham, vice-president of exploration services at Wood Mackenzie told The Daily Telegraph.

“The reason they are interested is that it has the potential to work on a very large scale.”

One of the world’s last remaining great frontiers, the Arctic is expected to play a major role in supplying the world’s future energy needs by 2030 and if the West fails to tap these riches quickly, then Russia will have no such reservations.

As the race for Arctic oil heats up, President Vladimir Putin dispatched warships last week to reopen frozen bases that could be used as a springboard for Russian drillers, while also allowing the Kremlin to control the new Northern Sea Route that has opened up because of the melting ice. The state-owned Russian energy giant, Rosneft, is already working in the Barents Sea.

“There is a lot of speculation already about the size of the prize offshore in the Arctic. However, there are huge challenges to exploit these resources such as the ice, which is obvious, and the remoteness,” said Latham.

“What is new is that there is material potential offshore in the Arctic,” he added.

The technical challenges of operating in such a harsh and remote environment were highlighted last year when Royal Dutch Shell had to suspend operations off the coast of Alaska after the Kulluk drilling rig ran aground in stormy weather.

Faced with legal challenges to its licences in the Chukchi Sea and the need to make multi-billion-dollar savings on capital expenditure in January, Shell’s new chief executive, Ben van Beurden, appeared to signal that the company would possibly walk away from the area.

However, late last month the Anglo-Dutch company surprised the market and the wider industry when it submitted a new proposal to the Federal government to restart exploration activities offshore in the Alaskan Arctic.

The Shell plan reportedly involves using two rigs in the Chukchi to reach production eventually of around 400,000 barrels per day (bpd) of crude. Shell has already spent around $5bn (£3bn) attempting to extract oil from the Alaskan Arctic and its desire to return to the Chukchi is indicative of the importance oil majors now place on the region, which could ultimately deliver