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September 2008

Vol. 13, No. 36 Week of September 07, 2008

Our Arctic Neighbors: Iceland prepares for offshore licensing

Oil and gas exploration and development could bring massive boost to budget of a country that is half the size of Alaska

Sarah Hurst

For Petroleum News

Iceland hosted its first exploration conference in early September, in preparation for the first exclusive licensing round in Icelandic waters for the exploration and production of hydrocarbons. The offer period is scheduled to begin Jan. 15, 2009, and the licenses are for the Dreki area, which is in the Atlantic Ocean, northeast of Iceland, on the Jan Mayen Ridge. The conference discussed the geology of the Jan Mayen Ridge, results of seismic surveys of the area and Iceland’s regulatory system.

Previously known for developing its geothermal resources and experimenting with hydrogen fuel, Iceland is making this foray into offshore oil and gas exploration at a time when other Arctic nations are also increasing their activity in the region. The country’s population of 316,252 is less than half that of Alaska and its GDP of $20 billion is also less than half of Alaska’s gross state product for 2007. Iceland has no national oil company.

Iceland aims at sensible utilization of oil resources in the greatest possible harmony with the environment and society, the government said in a statement about the licensing round. “There is no assurance that producible quantities of oil and gas will be found in the Dreki Area, but it is clear that considerable oil and gas discoveries could have (a) vigorous impact on Iceland’s economy,” said Minister of Industry Ossur Skarphedinsson.

“The gross domestic product could increase considerably when construction and production are at their peak, and the State Treasury’s revenues would similarly increase,” Skarphedinsson continued. “This would therefore strengthen the nation’s economic foundations; in addition, oil production would reinforce settlement in northeast Iceland.”

Norway may participate

The northern part of the Dreki area where the licenses are being offered covers 16,486 square miles, and is between 67 and 68 degrees north. Water depth is 3,280 feet to 6,560 feet in 80 percent of the area. There is a treaty with Norway on the northernmost 30 percent of the area, and Norway may participate with up to a 25-percent share in exclusive licenses within the treaty area.

Several factors indicate that the northern Dreki area may have significant hydrocarbon potential, according to the Icelandic government. Sedimentary rocks of sufficient thickness and age are present. There are indications of the presence of sedimentary strata pre-dating the initial opening of the Norwegian-Greenland Sea. Such sediments are likely to be analogous to those preserved in the Jameson Land basin of onshore East Greenland where source rocks are present and oil is known to have been generated.

Reservoir rocks are also likely to be present, and structures and stratigraphic configurations with potential to act as hydrocarbon traps are clearly present. Seismic reflection anomalies have been observed which may indicate the presence of hydrocarbons. The government said that sufficient seismic reflection data is available to do in-depth studies, but no exploration wells have been drilled in the area to date. l






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