In 2007 a Russian submarine planted a flag on the sea floor underneath the North Pole, and the country claimed the North Pole as Russian territory. Now Denmark/Greenland is preparing its own claim. Five other nations — the US, Canada, Iceland, Finland, Norway — are also staking out the Arctic Ocean’s floor.
Put it down to global warming. The Arctic region has felt the effects of global warming more quickly than any other place on earth, and the reduction in sea ice cover and thickness has re-awakened plans for Northwest and Northeast Passages that would cut the shipping time from Europe to Asia by a third. And there is believed to be plenty of oil and natural gas as well.
Continue Reading Below
The US Geological Survey estimates that the Arctic holds about 90 billion barrels of oil, 1,700 trillion cubic feet of natural gas, and about 44 billion barrels of natural gas liquids. The retreating sea ice is making it possible to think about extracting some of these riches.
Under the United Nations Convention on the Law of the Sea, no country owns the North Pole, but nations do have sovereignty offshore out to 200 nautical miles and can claim sovereignty beyond that if the nation can prove that its continental shelf extends further. That is the basis for the Russian claim and the coming Danish claim.
Provided that all the countries with skin in the game play by the rules, it could take as many as 20 years to adjudicate even one nation’s claim beyond the 200-mile limit. And it is highly unlikely that any sort of real exploration and production could occur until at least a decade after the decisions are made. Then it would take another 10 years to find and begin extracting the resources. That’s approximately 2050.
By then, of course, crude oil could cost more than $500/barrel or it could be worthless. The unfrozen Arctic seas offer more of a shipping opportunity than anything else.
None of the big oil companies appears to be even remotely interested in the Arctic. BP plc (NYSE: BP) and its Russian partner TNK, are currently in a dispute over a stake in a project off the north coast of Russia that has been on the drawing boards for at least a decade and is not really any closer to being productive now than it was then.
Drilling for oil or natural gas in the what may be the world’s harshest environment will be neither easy nor cheap. There probably doesn’t even exist today some of the technology that will be needed to make drilling possible.
It is very likely that the most noise will come from Russia, where an aging population and a growing dependence on resource extraction combine to give the Russian claims an urgency missing in the US. Canada and the other Arctic states are taking the Russians much more seriously and are preparing their own counter-claims in an effort to avoid being steam-rolled by the Russians.
Santa, of course, has maintained a dignified silence on the matter.