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The Times: Battle for final frontier

July 6, 2007
Carl Mortished: Analysis

Canada is marching north to assert sovereignty in the Arctic, to repel Danes and claim Hans Island, a rock the size of a football field between Ellesmere Island and Greenland. It is not quite war but it is enough for Canada’s Prime Minister to tour the Arctic Circle to assert Canadian control of the Northwest Passage.

A mad scramble is under way for Arctic riches: fish, diamonds, oil and gas. Two years ago Canada incensed the Danes by flying its flag from Hans Island; both claim sovereignty. America and Russia are quarreling over the Beaufort Sea while Norway and Russia wrangle over the Barents Sea. Underlying the disputes is the certain knowledge that vast oil and gasfields lie beneath the ice. This is the last frontier for oil and gas and the irony is that it may not contain quite the scale of riches once believed. The US Geological Survey estimated that a quarter of the world’s undiscovered hydrocarbons lay in the Arctic. A recent study by Wood Mackenzie suggests it may be more like one-fifth and mostly gas. The total known Arctic resource, say the consultants, is 233 billion barrels with a further undiscovered 166 billion barrels. About 69 per cent of it is Russian gas.

Oslo and Moscow look close to settling their dispute. Norway needs agreement, a recent exploration campaign was disappointing. On the Russian side is Shtokman, 3.5 trillion cubic metres of gas that President Putin insists is out of bounds for Western companies.

The physical danger is great and the cost gigantic, $1 trillion is a low-ball estimate to recover the resource, reckons Wood Mackenzie. But whatever the price, the oil majors must push north. The door to the Middle East is shut, biofuels pose a threat to food production and coal is dirty. If Shell, BP and ExxonMobil are to remain open for business, the Arctic is the only frontier left.

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2034106.ece

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