Scramble to unlock Arctic's energy potential

Addressing the World Economic Forum in Davos, Switzerland, analysts and key industry figures argued that unlocking the region's potential could help ease global concerns over assured energy supplies. But difficult questions remain about the impact on the environment and the fraught subject of exactly who owns what, with up to eight countries claiming some interest in the Arctic and others racing to catch up. "It will never replace the Middle East" as an oil source, said Helge Lund, head of Norway's Statoil energy group, but "it has the potential to be a good supplement." Lund said the Arctic may account for as much as 25 percent of undiscovered oil and gas resources worldwide, the equivalent of 375 billion barrels. Analysts say the Arctic is highly attractive because it is closer to Europe and the United States, reducing transportation costs, and offers the prospect of more stability and supply security than the volatile Middle East. Moreover, global warming has reduced Arctic sea ice -- which last year was the lowest on record -- and opened the way for increased marine transport and access to natural resources. George Newton, chairman of the US Arctic Research Commission, said surface temperatures were set to rise up to 5.5 degrees within a century even without taking the impact of booming economies such as China and India into account. He predicted tourist and commercial maritime traffic through the fabled and normally ice-locked Northwest Passage within a decade. Even China, he added, was showing an increasing interest in Arctic research and had recently bought an icebreaker. European Union energy commissioner Andris Piebalgs said Brussels wanted to diversify its energy suppliers. Currently, a quarter of its natural gas comes from Russia, and 15 percent from Norway.
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"We regard Russia in the future as a reliable supplier," he said, but that did not mean the European Union should not seek alternatives. "We should be more concerned about situations where there is disruption of supply." Lund said that if Barents Sea resources could be successfully exploited, a new gas pipeline could be attached to existing pipelines serving Europe. He said concerns over the environmental impact of increasing use of Arctic resources could be allayed by new technologies such as sub-sea facilities that would not harm fish and other marine stocks. "Often people under-estimate the power of technology" to cope, Lund added, calling for a single management regime for all the Arctic's natural resources on the basis that "neither fish and hydrocarbons know boundaries." But that touches on another tricky issue -- deciding which country owns or can exploit which parts of the Arctic. Eight nations -- Canada, Denmark (via Greenland), Finland, Iceland, Norway, Sweden, Russia and the United States -- have Arctic interests. Of those, all bar Sweden and Finland enjoy Arctic coastlines, and border and sovereignty disputes, such as between Russia and Norway, Russia and the United States and the United States and Canada, are hampering cooperation. A country is permitted 200 nautical miles under the Law of the Sea for its territorial waters, but can also lay claim to extra mileage on the continental shelf -- essential to explore and utilise sub-sea energy resources. "I don't see any geopolitical tensions arising out of the Arctic," Piebalgs said, although Newton pointed out that unlike Russia, the United States still had not ratified the treaty.