The Arctic region is largely under-explored, owing to its cold, harsh climatic conditions, frozen seas, and lack of investment in infrastructure development in the region. This picture is gradually changing as Arctic countries, particularly Russia is keen on exploring the region for its economic potential. According to separate estimations from the US and Russian agencies, the Arctic region is likely to have around 20%-25% of world’s untapped hydrocarbons – potentially amounting to a $35 trillion opportunity, which is quite significant in the global context. Moreover, dwindling oil and gas reserves elsewhere and increasing climate in the Arctic is also compelling exploration and production (E&P) companies to venture into this region in search of hydrocarbons.
Russian looking to take control of the Arctic
Russia has the natural advantage of having the longest coastline along the Arctic giving it the territorial right to explore its continental shelves. With financial support from China, Russian oil and gas companies, such as Gazprom/Gazprom Neft, Rosneft and Novatek are looking to develop the Arctic region into a new oil and gas hotspot. These companies are also benefiting from global warming as the shrinking ice cover is enabling maritime activities in the region. By integrating strategic planning with resource development, Russia is working towards converting the Northern Sea Route as a cost-efficient alternative to the Suez Canal and profit from trade and industrialization in the Arctic.
Environmental concerns continue to threaten Arctic E&P
Ecology of the Arctic has been largely undisturbed by industrialisation and urbanisation due to its extreme climate and remoteness of the location. Environmental conservation activists and scientists studying climate change would prefer the region to remain that way. These groups have received a considerable fillip with the adoption of United Nations’ Climate Change Framework of 2015. The framework has also prompted several financial institutions, including Royal Bank of Scotland, Societe Generale, and ABN Amro, to discontinue their exposure to oil and gas projects in the Arctic. The call for limiting industrialisation in the Arctic is bound to get severe in the coming decade. However, it is hard to predict if that would prevent Russia or China from halting their oil and gas operations in the Arctic.
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