Greenland opens to oil exploration

The Associated Press

Rising temperatures are giving Greenland the opportunity to tap into billions of barrels of oil and gas trapped under ice.

Greenland, a self-governed province of Denmark that’s roughly the size of Saudi Arabia, plans to auction off rights to crude-oil and natural-gas reserves officials believe will become feasible to exploit once the ice recedes. The island is setting a delicate balance for itself as both a bellwether to environmentalists looking for evidence of global warming, and as the latest frontier for oil and gas companies.

Greenland’s Bureau of Mines and Petroleum the week of Jan. 7 awarded oil and gas leases for tracts off its west coast, which is already free of ice for at least five months out of the year. The agency is now in the early stages of planning a similar sale for the northeast and northwest coasts, where exploration is difficult to impossible, even in summer months.

“There’s a lot of sea ice in those areas, but that sea ice is melting,” said Jorn Skov Nielsen, the department’s deputy minister. “I definitely think we can have a licensing round in 2012; that will be an appropriate time to start exploration.”

The U.S. Geological Survey estimates that offshore northeastern Greenland alone holds up to 31.4 billion barrels of undiscovered oil equivalent, which includes natural gas. If proven, those resources would make the region the 19th-largest hydrocarbon reserve in the world, on par with the oil sands in Alberta. Thick, year-round ice has made exploration impossible until recently but as temperatures have risen in the Arctic, more and more of Greenland’s territorial waters are being exposed.

Despite the warming, the region’s punishing climate and brief ice-free window are likely to deter all but the most daring energy companies.

Economics challenging

Producers have drilled just six wells in Greenland — and only once since the 1970s — but record oil prices and declining reserves in more hospitable climates have driven at least half a dozen companies to roll the dice. Exxon Mobil Corp., Chevron Corp. and EnCana Corp. are among the producers with holdings off west Greenland.

Cairn Energy PLC, a small Scotland-based producer long active in India, now controls or has a stake in six of 10 blocks, or units of territory, leased by Greenland. The company plans to conduct seismic testing this year to determine the size of its reserves, and could determine in 2009 whether to drill wells. Progress will be slow even after Cairn starts drilling, however, as the weather allows for work only five months out of the year, said Mike Watts, the company’s director of exploration.

Nielsen, with the Bureau of Mines and Petroleum, said it will be eight years at the earliest before West Greenland produces its first oil or gas. Other regions, such as the northeast, are only just beginning to emerge as realistic possibilities as temperatures rise.

While Greenland’s energy sector stands to benefit enormously from climate change, the island’s leaders treat potential oil reserves and melting ice as two separate issues.

The island’s prime minister noted Jan. 11 in a speech that Greenland’s indigenous hunters are among the first to have had their way of life uprooted by climate change, adding that “we have the political ability to make the urgent decisions that are necessary for halting the man-made climate changes.”