Our Arctic Neighbors: Companies eye offshore Iceland resources

Arctic area near Jan Mayen Island is divided between Norway, Iceland, but only Icelandic sector is open to petroleum activities

Sarah Hurst

For Petroleum News

Norway’s Sagex Petroleum is partnering with Iceland’s Lindir Exploration in an application for a production license in the Dreki area between Iceland and Jan Mayen Island, the Norwegian Petroleum Directorate said in its Resource Report 2009, published in early September. Norway’s Aker Exploration was the only other company to apply for a license in the area when the deadline expired in May, but Aker withdrew its application in July.

The Jan Mayen Ridge is a microcontinent that extends from Jan Mayen Island to the southern point of Iceland. Two episodes of seafloor spreading were important for its geological development, according to the NPD.

A great deal of volcanic activity took place 55 million years ago when the North Atlantic was developing in the Early Eocene, in the first episode, and a vast area was covered by basalt (lava).

In the second episode the Jan Mayen microcontinent was part of East Greenland until 25 million years ago (Late Oligocene), when it broke away and reached its present position between Greenland and Norway.

“The petroleum potential of Jan Mayen is unknown, but all the essential geological prerequisites for the formation of petroleum may be present, just as they are in East Greenland and the More basin,” the NPD wrote. “Sediments which may contain petroleum may have been deposited before the North Atlantic opened, that is, prior to the formation of the basalt (in the Mesozoic to Early Eocene). Younger sediments deposited above the basalt may also contain petroleum.”

The NPD acquired about 3,600 miles of 2-D seismic from the Jan Mayen area in 1979, 1985 and 1988, and has made the data available in four packages. Seismic data were also gathered commercially on the Icelandic part of the ridge in 2001 and 2008, with the participation of Sagex.

Sagex employees, including the CEO, carried out research on the geology of the area in the 1970s and 1980s, the company said in a release July 23.

“It will be challenging to carry out petroleum activity in the Jan Mayen area, not so much climatically or in terms of the 1,000-2,000-meter (3,280-6,560-feet) water depth, but due to the large distance of some 300 kilometers (186 miles) to shore. Technologies for drilling and producing petroleum at water depths of more than 3,000 meters (9,840 feet) have long been perfected,” Sagex said.

In 1981, Norway and Iceland entered into an agreement concerning the continental shelf in the area between Iceland and Jan Mayen, and an area for cooperation was established on both sides of the partition line. The two nations agreed in 2008 to share the petroleum resources and jointly participate in production licenses in the area.

The Icelandic part of the area was opened for oil exploration in 2001 and the first licensing round was announced in January 2009. The Norwegian part remains closed to petroleum activity.

Award of the production license is scheduled for October following negotiation on the terms.

“Simultaneous activity in the Icelandic and Norwegian parts of the area is by far to be preferred with respect to resource management and safety aspects,” Sagex said. “Further, Norwegian oil companies and service suppliers would have a lot to contribute in an industry that could prove instrumental in rebuilding the Icelandic economy.”

Iceland’s three largest banks collapsed during the global economic crisis in 2008.