The oil industry remains one of the most important economic sectors in the Arctic Circle. Traditionally remote and dangerous for humans to travel, the discovery of oil in northern portions of Alaska and other parts of the Arctic have spurred economic development, aided by improving technology that allows for easier oil extraction in treacherous locations. With climate change making the Arctic Ocean safer to travel, it is likely that Arctic oil exploration and development will increase in the coming decades.
While Arctic oil extraction is largely concentrated in Alaska, significant reserves of oil and natural gas have also been found in the Arctic regions of Canada, Greenland, and elsewhere. This is a brief history of oil extraction in the Arctic Circle.
The Oil Industry in the Arctic Circle
The Arctic region is comprised of 19 geological basins, half of which have been explored for oil and gas resources. A 2008 study by the United States Geological Survey estimates that the Arctic Circle contains as much as 90 billion barrels of recoverable oil, representing 13 percent of the world’s oil supply, and 44 billion barrels of natural gas. More than half of these oil and gas reserves are believed to be located in three basins: Arctic Alaska, the Amerasian Basin (comprising Russia and Canada), and the East Greenland Rift Basin. Additional oil reserves are believed to be located in the East Barents Basin and the West Greenland-East Canada Basin.
Oil exploration in the Arctic has traditionally been limited by cost and technology. The Arctic itself remained impassable by ships until relatively recently due to ship technology being insufficient to survive the large amounts of sea ice in the Arctic Ocean. These technological limitations made oil exploration and drilling impractical. Additionally, the sheer cost of oil extraction in the Arctic makes doing so a money-losing endeavor unless the price of oil is above a certain point.
The history of oil extraction in the Arctic stretches back across the 20th century. In the 1970’s and 1980’s, Petro Canada, Dome Petroleum, and a number of other companies began oil exploration in the Canadian Arctic. After 176 wells were created, explorers uncovered 1.9 billion barrels of oil, an amount too small to justify continued exploitation, resulting in the wells being sealed and abandoned. The complex geology of the Canadian Arctic has inhibited continued exploration, with tectonic pressures resulting in considerably more natural gas than oil, as well as tectonic fractures causing oil that was present at one point to leak out into the ocean.
In 2007, Russian geologists embarked on the Arktika 2007 journey to explore the Lomonosov Ridge, an underwater ridge located between Russian territory in the eastern Arctic Ocean and Ellesmere Island in Canada. The geologists revealed that the Lomonosov Ridge was physically connected to Russia’s land territory, allowing the country to make a formal claim to the region. According to the scientists, the Lomonosov Ridge contains over 10 billion tons of oil and natural gas.
Greenland is also believed to be a source of Arctic oil and natural gas. In 2001, the U.S. Geological Survey estimated that the waters of the Greenland Sea, located off the country’s northeastern coast, could hold as much as 110 billion barrels of oil. Prospecting along the coast has been handled by Nunaoil, a state-owned corporation controlled by Denmark and the Greenlandic government. Greenland has also engaged in oil exploration on its western coast, believed to be more desirable because it is comparatively free of ice, making oil extraction less costly and dangerous.
Norway also lays claim to Arctic oil reserves, having exploited oil resources off its coast for decades. In 2012, Statoil (now known as Equinor), a Norwegian oil company majority owned by the Norwegian government, signed a deal with Rosneft, an oil company owned by the Russian government, to explore the country’s Arctic territory for oil. In contrast to other countries, Norway is uniquely equipped to handle safety and spill issues in the Arctic, having been recognized as a world leader in oil extraction techniques.
The United States is the country with the longest history of exploiting Arctic oil reserves. The discovery of the Prudhoe Bay Oil Field in Alaska in 1968 spurred a long wave of economic development in the region. The construction of the Trans-Alaska Pipeline System in the 1970’s allowed for the safe and cheap export of oil from Prudhoe Bay to Valdez, located on the state’s southern coast. The pipeline was necessitated by the extensive sea ice along Alaska’s North Slope, which combined with the region’s lack of infrastructure made sea transportation of oil an expensive and dangerous prospect.
The opening of the Trans-Alaska Pipeline System helped reinvigorate the Alaskan economy, turning Fairbanks—the closest major city to Prudhoe Bay—into a regional economic powerhouse. The construction of the Dalton Highway during this same time period further aided the region by linking Prudhoe Bay with Fairbanks, and by extension the rest of the North American road network. The U.S. has also considered oil extraction in the Chukchi Sea, a body of water separating Alaska from Siberia.
Oil development in the Arctic has stalled in the past decade due to a global lowering of oil prices. The advent of hydrofracking technology has allowed additional deposits in the continental U.S. and elsewhere to be exploited, making Arctic development more costly and less desirable. The subsequent oil glut has also removed incentives for Arctic oil exploitation, at least in the U.S. and Canada. Environmental concerns have also played a role, with conservationists worried that excessive oil exploration could harm the Arctic’s ecosystem, which has already been affected by climate change.
However, given the depletion of oil reserves in other parts of the world, Arctic oil exploitation will remain on the agendas of Arctic nations for the foreseeable future. Improving ship technology combined with lowering sea ice levels in the Arctic Ocean have made continued exploitation more economically feasible. The U.S., Russia, Canada, and Denmark have been engaging in tussles for control over the Arctic’s resources, which are likely to intensify as oil extraction in the region becomes less costly.
Oil extraction forms a vital and growing plank of the Arctic economy. With the world dependent on oil to function, oil deposits in the Arctic Circle are simply too important a resource for governments and corporations to ignore. While the recent oil glut has slowed development somewhat due to lower profit potential, improving technology, climate change, and other factors will ensure that oil remains a significant part of the Arctic landscape.