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Russell Gold -
ExxonMobil Corp.’s blockbuster $2.2 billion deal to drill for oil in the frigid waters north of Russia with OAO Rosneft is the latest sign of the energy industry’s white-hot interest in exploring above the Arctic Circle.
The region encompasses about 12 million square miles — just 6% of the earth’s land mass. But it is estimated to contain the oil and natural-gas equivalent of 412 billion barrels of oil, about 22% of the world’s undiscovered oil and gas.
More recently, thinning ice has made it easier to work in some parts of the Arctic. And the persistently high price of oil, along with political constraints elsewhere, has encouraged Royal Dutch Shell PLC and Cairn Energy PLC to invest billions of dollars on previously unexplored areas.
The challenges, however, are daunting. The extreme weather and ice flows during colder months could wreak havoc on oil-industry platforms. Cleaning up an oil spill would be a huge effort. The seas there don’t support the microbes that can break down oil droplets. Existing air strips, ports and villages in the Arctic couldn’t accommodate the type of massive response that occurred in the Gulf of Mexico last year.
The Arctic is largely untouched by industrial development and, due to its year-round cold, would be least resilient to an oil spill, notes the Arctic Council, an intergovernmental forum of nations bordering the region.
Despite such environmental objections, arctic exploration is poised to move ahead quickly. Exxon and Rosneft, for instance, hope to begin preliminary exploration work next year.
A Rosneft official said on Wednesday that the two companies hope to drill their first exploratory well by 2015 and, if everything goes well, could begin production in the region by early next decade.
Rosneft estimated the areas it hopes to explore over the next few years have estimated recoverable reserves of 4.9 billion tons of oil, or about 36 billion barrels.
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