Natural Gas

A long-awaited survey by the U.S. Geological Survey shows that the Arctic may contain up to more than a fifth of the world’s undiscovered oil and gas. This could make the Arctic the energy industry’s Final Frontier.

The survey shows that the region forth of the Arctic Circle could contain as much as 90 billion barrels of oil and 1,670 trillion cubic feet of natural gas. If correct, this region would contain more than the proved gas and oil reserves of Russia–second only to Saudi Arabia in terms of oil production.

The report will likely keep the fires burning for those who want access and the greens who want the area declared off limits to energy production.

But, don’t expect new production fields to go online immediately–or even in the next decade.

In releasing the report, USGS geologist Donald Lee Gautier says, “It will not ratchet up global production like a new Saudi Arabia. These are additions that will will come over time.”

There is already a lot of interest in the Arctic regions, with Royal Dutch Shell spending more than $2 billion acquiring leases in Alaska’s Chukchi Sea. In a joint venture, Exxon Mobile and Imperial Oil Ltd. of Canada spent about $600 million to win a block in Canada’s Beaufort Sea. Also, BP Plc has said it will spend about $1.5 billion to develop the Liberty oil field off the northern coast of Alaska.

But resistance is growing. Shell was forced to delay E&P plans off the northern coast of Alaska because of a lawsuit filed by an environmental group that says any seismic surveys or drilling would upset the local populations of whales and walruses.

And here’s a wrinkle that hasn’t gotten a lot of attention. In releasing the USGS report, Gautier says that a lot of gas reserves are actually in waters claimed by Russia in such places as the South Kara Sea and the South Barents Basin.

Stay tuned. More to come. Russia is preparing one of its largest wargames in years to defend its claim for vast areas of the Arctic. Canada is also beefing up its military presence in its frozen frontier region and the other Arctic nations–Denmark, Norway and the U.S. are scrambling to try and lay claims to more land in the region.

There’s a lot more to come.

–John A. Sullivan, News Editor, Oil and Gas Investor, www.OilandGasInvestor.com, jsullivan@hartenergy.com

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