Russian Artic: A new promissed land for oil gaints

21^st World Petroleum Conference took place in Moscow, Russia from 15^th- 19^th June 2014.

5000 delegates including 30 ministers and 400 CEOs and heads of organisations from more than 80 countries had attended the event.

Rex Tillerson, chief executive for U.S. giant ExxonMobil in this conference mentioned that Arctic is one of the world’s largest remaining regions of undiscovered conventional oil and natural gas resources.

Even Tim Dodson, a senior executive at Norwegian group Statoil also mentioned that the Arctic is one of the very few remaining areas with the potential to make huge discoveries.

More than 20 per cent of the world’s hydrocarbon reserves yet to be discovered are situated in the Arctic, according to a 2008 report by government agency the U.S. Geological Survey (USGS).

Such reserves are said to be located largely in Russia, stretching from Western Siberia to the extreme east of the country.

These reserves are tens of degrees below zero during winter which are home to endangered species and remote infrastructure.

Many oil and gas companies are trying to overcome the climatic obstacles of  the Russian Arctic to tap the resourceful area.

The challenges involved in it are

• Russian Arctic region is not unfamiliar territory for the oil industry as compared to the large fields which have been explored and exploited for decades in Alaska, the north of Norway and in Russia's Sakhalin region.
• The climatic conditions are the most visible challenge as ice, snow, cold and darkness all contribute to an environment that can be both hostile and beautiful.
• To unlock the full potential of the Arctic and also to make Arctic projects commercially viable and globally competitive, there is need for new technology and innovative business models.
• Exploration of the Russian Arctic will require significant support from the Russian government in addition to investments by private corporations.
• This exploration will require expansion of railroad infrastructure and the building of a network of ports, in addition to other major constructions.
• Global warming, in recent times has caused the Arctic ice cap to melt and open new navigation routes leading to previously inaccessible raw materials.
• Non-governmental organization, Greenpeace has claimed that Arctic oil and gas exploration will not only harm the fragile ecosystem but also damage the habitat which is home to endangered species such as polar bears and cetaceans and further accelerating climate change. 

Oil & Gas reserves in Artic region of Russia

Fossil fuels rank first among the Arctic’s valuable non-renewable resources.

In some areas oil seeps have been known and used by indigenous peoples for centuries.

During the 1960s, extensive hydrocarbon fields were discovered in Russia’s Yamalo-Nenets region.

During the last several decades, the Arctic territories of Russia, Alaska, Norway, and Canada have produced billions of cubic meters of oil and gas.

Given the technical and physical challenges of Arctic exploration, only about half of the identified geological basins have been surveyed for fossil-fuel resources.

Nonetheless, more than 400 onshore oil and gas fields have been discovered north of the Arctic Circle.

About 60 of these are very extensive, but roughly one quarter of them are not yet in production.

More than two-thirds of the producing fields are located in Russia, primarily in western Siberia, where oil and gas development has expanded dramatically over the past several decades.

In total, Arctic oil and gas output currently amounts to approximately 240 billion barrels of oil and oil-equivalent natural gas, nearly 10 percent of the world's known conventional 

petroleum resources.

Future potential

While most offshore areas have not been surveyed for resources, the extensive continental shelves in the region are believed to hold huge reserves of oil and gas.

In 2008 the U.S. Geological Survey (USGS) completed the most comprehensive assessment of potential hydrocarbon reserves to date, using computer modeling to evaluate 25 Arctic geological provinces.

From this, the USGS estimates that the “undiscovered, technically recoverable” stores of petroleum include 90 billion barrels of oil, 1,670 trillion cubic feet of natural gas, and 44 billion barrels of natural-gas liquids.

These figures suggest the Arctic may hold about 22 percent of the undiscovered conventional hydrocarbon reserves untapped worldwide.

Roughly 85 percent of these potential reserves are thought to occur offshore at depths of 450 meters or less.

The majority of untapped natural gas probably lies within Russian territory, while most of the oil is located offshore of Alaska.

Given the technical and physical challenges of Arctic exploration, only about half of the identified geological basins have been surveyed for fossil-fuel resources. Nonetheless, more than 400 onshore oil and gas fields have been discovered north of the Arctic Circle.

Other sources have estimated that 100 billion tons of recoverable oil and gas (13 percent and 87 percent) are sequestered on the Russian continental shelf alone, along with untallied quantities of methane hydrate deposits.

Since most of the Arctic has yet to be physically explored, many experts are skeptical of the recent projections on potential oil and gas reserves.

Also, the USGS estimates that nearly 80 percent of the total reserves are comprised of natural gas and natural-gas liquids.

Developing these resources would involve much steeper costs than for oil, because the transport of natural gas to distant markets requires specialized tankers and storage facilities.

In the early 2012 Russia started the first commercial offshore oil drilling in the Arctic, on Prirazlomnaya platform in the Pechora Sea. This platform will be the first Arctic-class ice-resistant oil rig in the world.

Other challenges in exploiting offshore fossil-fuel fields in Artic region are

• Severe climate conditions and the presence of ice.
• The lack of technology and experience in offshore development.
• A shortage of qualified personnel.
• An incomplete understanding of the environmental risks. Furthermore, he points out, the remote locations of the resources would mean prolonged response times in dealing with emergencies such as oil spills and shipping accidents.