The Arctic – a region 21 million square kilometres in size – has been propelled into the international limelight. What was once considered a frozen wasteland is suddenly “like the centre of the world” claims Kuupik Kleist, a former prime minister of Greenland.
But why has this half-forgotten periphery become a focal point of global interest? And what does the future hold for this seemingly icy wilderness?
So, what has the Arctic got to offer?
In 2008, a study carried out by the US Geological Survey projected that Arctic reserves could account for up to 90 billion barrels of oil and 1,669 trillion cubic feet of natural gas, 13 per cent and 30 per cent of the globe’s estimated undiscovered resources, respectively. With 84 per cent of the region’s unexploited reserves located off-shore, any retreat in Arctic sea-ice brings with it substantial interest from the globe’s energy firms. Since the sinking of the first onshore wells in 1920, over 400 oil and gas fields have been discovered. Although production got off to a sluggish start due to high operational costs and relatively low oil prices (of just $15 a barrel), the future undoubtedly looks bright. With better technology, such as the development of horizontal drilling, and higher prices- which stood at $100 per barrel in June 2012- companies are flocking to the North to grab their share. According to Lloyds insurance market, the Arctic could attract $100 billion of investment in the next decade.
The Artic has an abundance of other minerals, too. Most notably, Arctic Alaska is home to the world’s largest zinc mine, the Red Dog Mine, which comprises 77.5 million tons of mineral resources in an area of just over 2 square miles. The Russians also enjoy an abundant share. The Norilsk-Talnakh, a world-leading nickel and palladium mine, is deeply rooted into a resource base of 1.8 billion tonnes. And mining in the region is poised for further growth, as seen by ArcelorMittal’s recent $590 million purchase of a large iron-ore deposit in the Canadian Arctic.
Additionally, bio-resources should not be over-looked. According to Seafood International, the Arctic is home to large concentrations of more than 150 species of fish, some of which (for example, cod and herring) play a significant role in the world fishing industry.
But there’s more on offer than just natural resources. Artur Chilingarov, the Arctic explorer who planted a Russian flag beneath the North Pole, suggested that significant economic opportunities will soon develop along the Northern Sea Route. As the Arctic ice retreats- with a reduction of 75 per cent over the last 30 years alone- new shipping lanes are opening up along the coasts of Russia and Canada. These new routes could cut many conventional shipping distances by up to 40 per cent. The journey from Rotterdam to Yokohama, for example, would be reduced by 3,700 nautical miles, slashing journey time by a whole 10 days. Per voyage, this could save up to $1 million.
Too good to be true?
However, there are still significant barriers to development in the Arctic and it will still be a number of years before resource exploitation really takes-off.
Importantly, the predicted moderation of the globe’s climate is by no means a given. Climatic conditions are still harsh and inconsistent, and projected shipping operations will still be limited to a handful of summer months, if at all. Such an environment requires appropriate precautions from seafarers operating in the region. The reinforcement of vessel hulls, installation of rudder and propeller protective equipment, and extensive heating systems, all come at considerable costs. Aside from initial financial setbacks, modified vessels have reduced average speeds by up to 15 per cent. Fuel consumption and insurance costs will increase concurrently. Thus, opting for the Northern Sea Route may not seem so economically attractive after all.
Risk is also high for oil and gas production. Exploiting firms fall victim to considerable costs, and significant investment in the region certainly doesn’t guarantee returns. Shell’s disastrous summer in the Chukchi Sea clearly displays the risks involved- $5 billion of investment and still no yield in sight. Projected costs of $40 billion similarly forced Statoil to pull out of the Shtokman field in 2012.
“The fragile Arctic is under threat from both climate change and oil drilling” reads the opening line on Greenpeace’s ‘Save the Arctic’ webpage. Over 3.5 million people worldwide have now signed their year-old petition, which calls for a sanctuary in this vulnerable region. In 2012, sea-ice levels fell to the lowest since records began- an astonishing 760,000 km² reduction of ice compared with the previous low set just five years prior. With the region playing a critical role in regulating the global climate and temperatures, it comes as no surprise that such alarming figures are being received with increasing concern. And yet, oil and gas companies are rushing to extract the very stuff which arguably accelerates sea-ice melt. Oil spills pose further concerns. “Freezing temperatures, a narrow drilling window and a remote location mean that an oil spill would be almost impossible to deal with” (Greenpeace). Despite elevated activity in oil extraction, the capping of a well blowout has never actually been tested in Arctic conditions.
Co-operation or conflict?
Attached to an increase in maritime activity and resource exploitation is the need to ensure security. Indeed, as history dictates, an area wealthy with resources brings with it the potential for conflict. Judith Matloff, a contributor to ‘The World Today’, argues that although no-one wants a military stand-off in the Arctic, no-one wants to be caught unprepared either. This is becoming more apparent with a growing international military presence in the region. In 2006, Norway hosted its first large-scale military exercise in the region. 10,000 soldiers from 11 different nations were involved, and this is now a bi-annual event. By 2012, this figure had risen to 16,300 soldiers from 14 nations. Russia has similarly increased its presence. In 2007 they began flying large numbers of bombers over the Arctic seas. In 2011 alone, 71 Russian aircraft were said to be identified off the Norwegian coast.
However, the commanding officer of Norway’s training operations, Lieutenant Colonel Lar Sundnes, insists that “no immediate threat exists”. Russia and Norway have recently signed a boundary agreement in the Barents Sea and have even partaken in joint military exercises. The increasing significance of the Arctic Council further confirms that there is actually a push for co-operation. Originally a research body, the Council has “matured from an environmental talk shop to a political force” (Matloff, 2013). Since its formation in 1996, the Council’s eight member states (Canada, Russia, the United States, Sweden, Denmark, Iceland, Norway, and Finland) have accepted 32 state-applications to join the Council as ‘permanent observers’. Openness is likely to work in the Council’s favour, argues The Economist, as observers can suggest projects and provide expertise and money. Worthy initiatives may also be adopted by a wider audience. In 2011, both members and observers adopted a multilateral treaty on search and rescue, and later agreed to address marine oil-spill-preparedness and response. The Council is currently overseeing the establishment of a regional fisheries organisation, which would manage its fish resources in a science-based manner.
Overall, the international significance of the Arctic is undoubtedly on the rise, and globalisation of this northerly region is set to continue at an augmented pace. Expect to see Arctic affairs appear more frequently in newspapers throughout the coming decade. Anticipate Russia to push for further economic development, and for the US to become more proactive in their northerly climes. But at the same time, expect further co-operation and do not forestall the rest of the world to sit back and remain on the side-lines.