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The Arctic is warming up to four times faster than the rest of the planet. With the permafrost thinning and sea ice receding, headlines often herald the opening of a new contentious frontier. Lying beneath the ice North of the Arctic Circle is the largest unexplored petroleum reserve left on Earth, holding an estimated 412bn barrels of oil and natural gas.
Nations within the Arctic Circle can establish exclusive economic zones 200 nautical miles from their shores. These zones that allow for the extraction of hydrocarbons can be extended if it can be proved that their landmasses extend into the sea. As a result, Canada, Russia, and Denmark have claimed the 55,000 sq m area of sea around the North Pole.
Melting sea ice is opening new routes for nations aiming to access and exploit vast untapped reserves. Russia continues to invest heavily, announcing $300bn of incentives for new oil and gas projects in 2020. Norway is allowing fossil fuel exploration, as well as issuing licences for drilling and deep sea mining for minerals.
In March 2023, the US authorised an $8bn oil project in Alaska, despite President Biden cancelling numerous exploration projects and legal objections from some indigenous groups. Even countries outside the region are looking north, with China investing more than $9bn in infrastructure and assets, but drilling in the Arctic comes with complications beyond geopolitics. Harsh conditions make drilling notoriously difficult, prolonged, and expensive.
For most projects to break even, volatile oil prices would need to stay between $63 and $84 per barrel. And offshore projects starting now might not come online until 2050. Only the wealthiest nations and companies can afford such risk. And even then, western oil companies, such as Shell and BP, have withdrawn from the region after investing billions of dollars. And it isn't only profit margins at stake.
Up to 1.6 trillion metric tonnes of carbon are stored in the Arctic permafrost, around twice the amount currently contained within the atmosphere. It means that any extension of oil and gas exploration into this final frontier could add a surge of emissions to greenhouse gases at around the same time as the world is aiming to hit its net-zero target. Add to that concerns over habitat and environmental damage along with the potential for oil spills and for many exploiting the Arctic's rich energy resources is a truly unpalatable proposition.
