Future Natural Resource Development

(from AMSA Report 2009)

Future Natural Resource Development A U.S. Geological Survey report, issued in July 2008, indicates the Arctic may contain as much as one-fifth of the world’s undiscovered oil and natural gas. More specifically, the assessment found the Arctic to potentially contain 90 billion barrels of undiscovered oil and 1,670 trillion cubic feet (47 trillion cubic meters) of undiscovered natural gas, representing 13 percent of the undiscovered oil and 30 percent undiscovered natural gas. Of the total for undiscovered oil reserves, more than half are estimated to occur in geologic provinces in the Alaska Arctic (offshore and onshore), the Amerasian Basin (offshore north of the Beaufort Sea) and in West and East Greenland (offshore). More than 70 percent of the undiscovered natural gas is estimated to be located in three areas: the West Siberian Basin (Yamal Peninsula and offshore in the Kara Sea), the East Barents Basin (location of the Russian Federation’s giant offshore Shtokman field) and the Alaska Arctic (offshore and onshore). Each of these regions would require vastly expanded Arctic marine operations to support future exploration and development. Several regions, such as offshore Greenland, would require fully developed Arctic marine transport systems to carry hydrocarbons to global markets.

Despite the recent global recession, two Arctic nations, Norway and the Russian Federation, have already made significant investments during recent decades in developing Arctic hydrocarbons in offshore Arctic Norway and northwest Russia’s offshore systems in the Pechora Sea. Arctic marine transport systems support each of these developments, and oil and LNG tanker traffic from the Barents Sea to world markets is expected to continue for several decades.

For the Russian Federation, future investments in developing the Shtokman gas field west of Novaya Zemlya in the east Barents Sea are evolving. This field, understood to be one of the world’s largest gas fields, lies 600 kilometers offshore and in depths of water to 2,000 meters. Exploration and development of this large, offshore region will require extraordinary levels of Arctic marine operations, most conducted in waters that are not ice-covered, but under extreme cold temperatures. Natural gas from Shtokman would be transported by sub-sea pipeline or a marine tanker system, either of which would increase marine operations in this region of the Arctic. For the United States (Alaska) and Canada, where offshore Arctic lease sales were held for the Chukchi (U.S.) and Beaufort (Canada) seas in 2008, the future remains uncertain. The leases represent long-term, strategic investments. Marine exploration of the Arctic offshore should continue during the next decade.

One of the key factors in future Arctic offshore developments is that a majority of the seabed oil and gas resources are located within the Exclusive Economic Zones (EEZs) of the Arctic states (i.e., Arctic offshore regions of Alaska, Canada, Norway, Greenland and the Russian Federation). While there remain several, regional boundary disputes where potential resources may overlap, the general jurisdictional issues are clear and do not appear to be significant obstacles to future Arctic hydrocarbon development.

Hard minerals development in the Arctic will continue to be influenced by global commodities markets and prices. However, the largest zinc mine in the world (Red Dog in the Alaska Arctic) and the largest nickel mine (Norilsk in Siberia) will continue to be solely dependent on marine transport systems - seasonal in the case of Red Dog and year-round operations for Norilsk Nickel. It is plausible that the summer, ice-free season for support to the Red Dog mine could be extended as Arctic sea ice continues to retreat in the Chukchi Sea.

The Mary River iron ore deposits on Baffin Island, Nunavut in the Canadian Arctic represent a highly valuable mineral resource (high grade iron ore of 67 percent iron). Plans have been underway for some time to develop a mining operation and ship to European markets 18 million tons of ore each year, estimated to last for a minimum of 25 years. This is a large Arctic project that would involve a fleet of ice-capable cargo carriers operating on a year-round basis between Baffin Island and Europe. Ice navigation would be required for operations in the winter and early spring.  

Greenland geology records more than four billion years of earth history, preserving significant mineral deposits. For example, the Kvanefjeld Project near the southwest tip of Greenland represents a multi-element deposit containing rare elements, uranium and sodium fluoride. Potentially world class and multi-commodity ore deposits exist in other regions of coastal Greenland. The exploration and development of these mines will require Arctic marine transport systems to carry these scarce commodities to global markets.

Arctic Council, 2009, Arctic Marine Shipping Assessment (AMSA), Arctic Council.©