24
Arctic Opening: Opportunity and Risk in the High North
production are approximately ten years, the commercial
companies should consider how the drive to develop Arctic
value of undiscovered fields is far less certain.
oil and gas exploration will align with international action on climate change mitigation.
For the most commercially marginal Arctic oil and gas developments, the tax regime applied may be a
Current and future Arctic oil and gas investments
decisive factor in determining their viability. There is wide
The scale of potential investment in both the onshore
variation in the government take of profits from Arctic
and offshore Arctic oil and gas industry is a small
projects, depending on government-set regimes, price
fraction of overall investment in the global oil and gas
and production costs. A recent study suggested that,
industry over the next 10–20 years: the International
at a sale price of $80 and a production price of $25, the
Energy Agency has suggested that overall investment in
government take for Arctic oil projects would range from
the oil and gas sector should total $20,000bn between
100% in Russia (though this is changing) to 40–45% in
2011 and 2035 38. Nevertheless, sustaining current and
xxi
Greenland and Canada . As governments offer incentives
projected rates of Arctic oil and gas could transform
for development, or as geological uncertainties are
local economies and global energy dynamics. If
reduced, the government take is likely to shift. The Russian
implemented, the Russian government’s ambitious vision
government’s terms for Yamal’s LNG development are
for investment in its high north would establish the
described as being “among the lowest in the world” xxii.
Arctic as a major gas-producing region.
The UNFCC and its member states have publicly stated
Given regulatory, commercial and geological uncertainty,
their commitment to meet a target of 2°C maximum
meaningful long-term investment projections in this
temperature rise by 2020. A business-as-usual attitude to
sector are hard to come by and difficult to make xxiii.
climate change will lead to a 4°C temperature rise, resulting
Each potential project faces a different set of technical,
in devastating impacts on people’s lives and the global
environmental and infrastructure issues: each country
economy. To reach the 2°C target, the world’s leading
presents a different legal and political context that will
economies will need to commit to a significant increase
influence investment. Box 3 looks at current investment
in their use of renewable energy. Governments and
projections for each territory.
Oil pumps in the Arctic. xxi
Pedro van Meurs, Barry Rogers, Jerry Kepes, World Rating of Oil and Gas Terms: Volume 3 – Rating of Arctic Oil and Gas Terms, Van Meurs Corporation Rodgers Oil and Gas Consulting & PFC Energy, 2011 (as reported in Petroleum Economist January 2012). xxii ‘Arctic investment competition heats up’, Petroleum Economist, January 2012, available at www.petroleum-economist.com/Article/2959654/Arctic-investment-competitionheats-up.html
xxiii
The offshore oil consultancy Infield has projected an average $7 billion annual investment in offshore Arctic exploration and development alone from 2011 to 2017. But this figure depends to a large extent on the 2016 go ahead for the Shtokman gas field development in the Barents Sea, a partnership between Gazprom, Statoil and Total.