Arctic Reserves are Russia's Ace27 April 2009
As larger portions of the Arctic region become accessible for exploration, Russia plans to make full use of the resources. GlobalData reports on the potential impact to the environment and global trade balances.
Global warming is making larger areas of the Arctic region accessible and exploration companies in the region are beginning to fast tracking exploratory activities. While this may open up a whole new window of opportunity as far as hydrocarbon reserves are concerned, it could also have a devastating effect on the world's environment. Thawing of the Arctic is likely to take the level of the seas much higher, and a lot of low-lying places could see themselves submerge and be wiped off the world map.
However, countries like Russia, with huge amounts of unexplored oil and gas reserves in the vast Arctic expanses within its territorial boundaries, stand to gain immensely, in terms of energy empowerment and changing the trade dynamics of the global oil and gas industry.
Among the major countries in the Arctic region – namely Russia, Canada and Norway – it is Russia that has the highest quantum of proved hydrocarbon reserves and the maximum area within the Arctic region that remains unexplored. This means that Russia will benefit the most from exploratory activities in its Arctic territories.
Russia's role in arctic exploration
Despite the hostile terrain and climatic conditions of the Arctic region, exploratory activities for oil and gas are continuing unabated. Technological advances are certainly making the task of the exploratory entities a lot easier.
However, to date, only half of the 19 geological basins in the Arctic region have been explored. Among the hydrocarbon reserves estimated to be present in the Arctic region, methane hydrates will probably have the maximum impact, in productive and potentially destructive ways.
The productive elements stem from the fact that even a small quantum of methane hydrates contains large amounts of energy in the form of methane gas. On the flipside, the large quantum of methane in them, of which at least some tends to escape, has an incredibly harmful effect on the environment. This is especially significant on the global warming front, as methane is an extremely potent greenhouse gas, with the capacity to trap nearly 21 times more heat than carbon dioxide.
Overall, United States Geological Survey (USGS) estimates that in 2008 the Arctic region contained more than 90 billion barrels of undiscovered, technically recoverable oil and 44 billion barrels of natural gas liquids in 25 geologically defined areas that have potential for petroleum. This is representative of nearly 13% of the undiscovered oil in the world.
Russia's fast-declining production of oil and gas has served as a wake-up call to the Russian government to look for new avenues of oil and gas reserves. USGS findings show that the entire Arctic region contains as much natural gas as the whole of Russia's proven natural gas reserves, demonstrating the extent of the region's hydrocarbon potential.
The findings also confirm that two thirds of the natural gas reserves expected to be present in the Arctic region fall within the purview of Russia – in the West Siberian Basin and the East Barents Basin, which straddles the territorial waters of Russia and Norway.
Russia's stranglehold over the global natural gas market is already well established. With significantly higher oil and natural gas reserves waiting to be explored by the Russian exploratory entities, the control that Russia commands over the world's energy dynamics and overall spectrum will only increase.
Russia has already been playing its bullying tactics with Ukraine, by stopping natural gas supplies to the country twice in the recent past. By doing so, Russia has caused a real energy scare to the rest of Europe, which relies on Russian energy supplies.
Russia's subsequent exploration of hydrocarbon reserves in the Arctic region will only give it more power on the energy front. It has the potential to bring about a completely different world order in terms of the countries with major hydrocarbon reserves. This is especially true since the Arctic hydrocarbon reserves within Russia's purview contain not only significant amounts of natural gas but also vast quantities of petroleum.
The Middle East and North African countries have the lion's share of the world's petroleum reserves today but with the opening up of the Russian Arctic, the global trade flow will witness a major change.
There is a considerable debate, however, over the legitimacy of Russia's hydrocarbon might in the Arctic region. Russia claims that the Lomonosov ridge, an underwater shelf in Russia's remote and inhospitable eastern Arctic Ocean with over 10 billion tonnes of oil and gas deposits, is linked to the Russian Federation territory.
Other countries debate this claim as under international law no country owns the North Pole. Instead, the five surrounding Arctic states – Russia, the US, Canada, Norway and Denmark (via Greenland) – are limited to a 200-mile economic zone around their coasts.
An important aspect that needs to be considered while looking at exploratory activities in the Arctic region is the environmental cost. There are already concerns that the thawing of Arctic ice from global warming may eventually result in sea levels rising significantly higher.
Arctic oil exploration may not have a direct correlation with global warming. But methane – a potent greenhouse gas, released at the time of exploration, especially from the vast quantum of methane hydrates known to be present in the region – could contribute immensely. In such a scenario, preservation of the Arctic ice cap would be a much higher priority than increasing the world's energy reserves. It seems to be a question of taking one step forward, only to take two steps backward.
Despite environmental concerns and voices against its activities in the Arctic, Russia is actively encouraging its oil and gas companies to pursue exploratory activities and efforts have already started to bear fruit. With Russia as a formidable entity on the global energy front, the undisputed standing of the countries of the Middle East will be challenged.
For energy-hungry countries like the US, however, the choice between energy imports from Russia or the Middle East could be just as difficult. Given the hydrocarbon reserves in the Arctic, Russia has the potential to cement itself into an energy superpower considering the vast natural gas reserves that it already holds.
This report was produced by GlobalData. For further reports and information visit www.global-market-research-data.com