There are big differences in the scale as well as the organization of offshore petroleum activity in various Arctic coastal states. In the United
States, Canada and Greenland, the initiative is clearly in private hands. In Norway and Russia, the state is more directly involved through ownership in dominant companies as well as state development priorities. However, each major investment project has its own character. The speed and force of Arctic offshore petroleum development seem to have abated somewhat in recent years. This is especially true for Alaska, but also in other parts of the Arctic there are concerns over costs–partly caused by stronger attention to environmental protection. Rising costs are a general problem for the petroleum industry, but particularly painful in areas that are already high cost, and perhaps marginal, like the Arctic. The gas market revolution, has made Arctic offshore gas much less commercially attractive. Furthermore, there is considerable public resistance to offshore petroleum activity in Alaska, Canada and Norway. The strongest public support for increased activity seems to be in Greenland, but there also a debate on the merits of offshore expansion is taking place. In Russia, the opposition to Arctic drilling is minimal.
In terms of maritime infrastructure, the overall conclusion is that not much is going on. There is an abundance of plans, but not much firm investment. This goes for all parts of the Arctic. But unlike Alaska, Canada and Greenland, where there is little infrastructure to begin with, Russia benefits from enormous investments in ports as well as icebreakers in the Soviet period. However, the need for new investment there is also urgent.
Norway’s Arctic coast is more developed than most other parts of the Arctic coastline, but ports must be extended if they are going to play a role in future Arctic development.
The development of port infrastructure seems to be a logical area for private-public partnerships since the major ports discussed will ultimately have several users, even if one particular project may be decisive for starting the development, as in the case of the port of Sabetta and Yamal LNG. The interest in controlling costs gives a strong impulse to develop dual-use facilities, and there is hardly any example of authorities claiming sole responsibility for infrastructure investment. Illustratively, in the new Russian Arctic strategy document from 2013, the idea of private-public partnership is repeatedly stressed as a solution to Arctic investment needs.
But what it means in practice exactly is unclear. This can only be clarified via negotiations on a case-by-case basis.
Notes
1. This paper builds on research from a project commissioned by DNV-GL.
2. Østhagen A. (2013). Arctic Oil and Gas. The role of regions. IFS Insights 2/2013 SEP, Ernst & Young (2012) URL: http://www.ey.com/Publication/vwLUAssets/
Arctic_oil_and_gas/$FILE/Arctic_oil_and_gas.pdf, Pembina institute (2011) Comparing the Offshore Drilling Regulatory Regimes of the Canadian Arctic, the U.S., the U.K., Greenland, and Norway. URL: http://www.pembina.org/pub/2227 3. Ernst & Young (2012). op. cit.
4. Northern Oil and Gas Annual Report (2012). URL: http://www.aadnc-aandc.
gc.ca/eng/1367341676920/1367341870731 5. Ibid.
6. Petroleum News September 2013. Providing coverage of Alaska and northern Canada’s oil and gas industry. URL: http://www.petroleumnews.com/
pntruncate/194159153.shtml
7. The Northwest Territories and Arctic Development in the Beaufort Area, Center for International Governance Innovation, Policy Brief No. 40, May 2014.
8. Government of Canada (2010). Canada’s Northern Strategy: Our North, Our Heritage, Our Future. URL: http://www.northernstrategy.gc.ca/cns/cns-eng.asp 9. Østhagen, A (2013): 11, op. cit., National Energy Board Update (2013).
URL: http://www.neb-one.gc.ca/clf-nsi/rpblctn/spchsndprsnttn/2103/
nbpdtnvkptrlmshw/nbpdtnvkptrlmshw-eng.pdf
10. Financial Post (2012). Nunavut sees devolution light after long Arctic winter.
http://business.financialpost.com/2012/07/20/nunavut-sees-devolution-light-after-long-arctic-winter/?__lsa=62ab-8179Nunavut sees devolution light after long Arctic winterNunavut sees devolution light after long Arctic winterNunavut sees devolution light after long Arctic winter
11. Ibbitson, J. (2013). Ottawa ready to cede new powers to NWT. The Globe and Mail. URL: http://www.theglobeandmail.com/news/politics/ottawa-ready-to-cede-new-powers-to-northwest-territories/article7997607/
12. National Energy Board Update (2013). op. cit.
13. Ibid.
14. For a broad overview of Canada’s upstream oil and gas industry see Canadian Association of Petroleum Producers (undated). URL: http://www.capp.ca/
library/statistics/basic/Pages/default.aspx 15. Ernst & Young (2012). op. cit.
16. Review of Offshore Drilling in the Canadian Arctic (2011). URL: http://
www.neb-one.gc.ca/clf-nsi/rthnb/pplctnsbfrthnb/rctcffshrdrllngrvw/
rctcffshrdrllngrvw-eng.html 17. Ibid.
18. Ernst & Young (2013). Global Oil and Gas Tax Guide. URL: http://www.
ey.com/Publication/vwLUAssets/2013_global_oil_and_gas_tax_guide/$FILE/
EY_Oil_and_Gas_2013.pdf 19. Østhagen A. (2013): 9. op. cit.
20. Shell, press release 27/02/2013. URL: http://www.shell.com/global/aboutshell/
media/news-and-media-releases/2013/shell-announces-pause-in-alaska-drilling-programme.html
21. Bloomberg (2013). Shell Sends Alaskan Rigs for Repairs, Clouding Work Outlook. URL: http://www.bloomberg.com/news/2013-02-12/shell-sends-alaska-rigs-to-asia-yards-clouding-drilling-outlook.html
22. Shell, press release 11/06/2013. URL: http://www.shell.us/aboutshell/projects-locations/alaska/events-news/shell-submits-chukchi-sea-ep.html Financial Times. Oil and Gas. URL: http://www.ft.com/cms/s/0/c3189f7e-46f8-11e3-9c1b-00144feabdc0.html#axzz2k39QLJsQ , Drilling in 2014 will focus on the Chukchi Sea rather than the Beaufort, which is shallower. Royal Dutch Shell plc .com (2013) URL: http://royaldutchshellplc.com/2013/11/01/shells-arctic-costs-spiral-as-it-admits-damaged-kulluk-rig-may-be-written-off/
23. WWF (2013). “Shell Announces No Drilling in Alaska’s Beaufort and Chukchi Seas this Summer”. URL: http://www.worldwildlife.org/stories/shell-announces-no-drilling-in-alaska-s-beaufort-and-chukchi-seas-this-summer
24. Reuters (2012). Statoil pushes back offshore Alaska drill schedule.
URL: http://www.reuters.com/article/2012/09/07/us-alaska-statoil-idUSBRE8861BF20120907
25. Ernst and Young (2013). op. cit.
26. Maritime Infrastructure – Key Issues Related to Commercial Activity in the U.S.
Arctic over the Next Decade. United States Government Accountability Office, GAO-14-299, March 2014.
27. Ibid.
28. Resource Development Council (undated). op. cit.
29. Ernst and Young (2013). op. cit.
30. USGS (2008). URL: http://pubs.usgs.gov/fs/2008/3049/fs2008-3049.pdf 31. Later studies indicated that these wells had been abandoned prematurely.
Østhagen, A. (2013) op. cit.
32. Ernst & Young (2013). op. cit.
33. The Arctic Institute (2014). Greenland’s New Frontier: Oil and Gas Licenses Issued, Though Development Likely Years Off. URL: http://www.
thearcticinstitute.org/2014/01/greenlands-new-frontier-oil-and-gas.html
34. Statoil press release 20/12/2013. Statoil awarded Greenland licence. URL: http://
www.statoil.com/en/NewsAndMedia/News/2013/Pages/Dec20Greenland.aspx;
and The Guardian (2014). URL: http://www.theguardian.com/business/2014/
jan/03/bp-wins-first-greenland-drilling-deepwater-horizon
35. The Arctic Journal, September 24, 2013. http://arcticjournal.com/business/123/
expansion-greenlands-main-port-would-pay-itself-consultants-say 36. Østhagen (2013). op. cit.
37. Ernst & Young (2013). op. cit.
38. Delacour (undated). URL: http://en.delacour.dk/news/2013/june/legal-framework-for-oil-gas-and-mining-in-greenland/
39. Østhagen (2013). op. cit.
40. “Greenland looks forward…” Financial Times, October 31, 2013
41. Statoil (2009), Snøhvit. URL: http://www.statoil.com/en/EnvironmentSociety/
S u s t a i n a b i l i t y / 2 0 0 7 / E n v i r o n m e n t / G o i n g N o r t h / B a r e n t S e e / P a g e s / Sn%C3%B8hvit.aspx
42. ENINorge (undated). URL: http://www.eninorge.com/no/Feltutbygging/Goliat/
Framdrift-2/
43. Facts 2013–The Norwegian Petroleum Sector, Oslo: Ministry of Petroleum and Energy.
44. Facts 2014–The Norwegian Petroleum Sector, Oslo: Ministry of Petroleum and Energy.
45. Offshore-technology.com (undated). URL: http://www.offshore-technology.com/
projects/skrugard-field-development-project-norway/
46. Facts 2014–The Norwegian Petroleum Sector. op. cit.
47. Tschudi (undated). Kirkenes Industrial Logistics Area (kila). URL: http://www.
tschudiarctic.com/page/256/Kirkenes_Industrial_Logistics_Area_KILA 48. Norwegian Government White Paper No. 7 (2011–2012). “The High North.”
49. See, e.g., “Need more time for Castberg,” Statoil press release, 30 June 2014. http://www.statoil.com/en/NewsAndMedia/News/2014/Pages/30Jun_
JCmelding.aspx
50. This includes the Okhotsk Sea in the Far East, which is geographically not an Arctic area, but which has Arctic conditions. It is expected to hold some 6.2 mtoe.
51. See also Moe, Arild, ‘Potential Arctic Oil and Gas Development: What Are
Realistic Expectations?’ In Oran Young, Jong Deog Kim and Yoon Hyung Kim (eds), The Arctic in World Affairs: A North Pacific Dialogue on Arctic Marine Issues. Seoul/Honolulu, Korea Maritime Institute/East-West Center, 2012, pp.
227-250.
52. “Gazprom Neft doesn’t see sanctions causing major problems for Prirazlomnoye,” quotations from Gazprom Neft First Deputy CEO Vadim Yakovlev, Interfax Russia & CIS Oil and Gas Weekly, 11-17 September 2014.
Gazprom Neft reports that 120 billion roubles had been invested in the project by the end of 2013 (which would correspond to 3 billion USD at the current exchange rate), and that 11 billion roubles would be invested each year in 2014 and 2015. “Gazprom Neft doesn’t…” op. cit.
53. Lars Petter Lunden and Daniel Fjaertoft: “Government Support to Upstream Oil &
Gas in Russia - How Subsidies Influence the Yamal LNG and Prirazlomnoe Projects,”
published by the International Institute for Sustainable Development, July 2014.
54. http://www.kommersant.ru/doc/2153997
55. Rosneft press release, 5 September 2014. URL: http://rosneft.ru/news/news_in_
press/050920142.html
56. Press release from Gazprom Neft, 30 June, 2014. URL: http://www.gazprom-neft.ru/press-center/news/1102430/?sphrase_id=84189
57. “Rosneft Exploration Well in Kara Sea to Cost 1 billion, Take Two Seasons to Drill”, Russia & CIS Business and Financial Newswire, April 15, 2014.
URL: http://business.highbeam.com/407705/article-1G1-365086769/rosneft-exploration-well-kara-sea-cost-1-bln-take-two
58. Rosneft CEO Igor Sechin in meeting on the efficient and safe development of the Arctic, June 5, 2014. URL: http://eng.kremlin.ru/news/22446
59. “ExxonMobil Statement on Treasury Department Sanctions on Russia,” 19 September, 2014. URL: http://news.exxonmobil.com/press-release/exxonmobil-statement-treasury-department-sanctions-russia
60. Murmanskiy Vestnik, 31 January 2014. URL: http://www.mvestnik.ru/shwpgn.
asp?pid=201401314 61. Ibid.
62. See also Moe, Arild, “Comments on Chapter 2: Russian perspective,” in Oran R. Young, Jong Deog Kim, Yoon Hyung Kim (eds), The Arctic in World Affairs - A North Pacific Dialogue on the Future of the Arctic. Seoul / Honolulu, Korea Maritime Institute / East-West Center, 2013, pp. 74-75.
63. Vitaly Chernov, “Cutting a Path in the Ice,” Portnews, October 11, 2012.
64. Press release from Baltiyskiy zavod, August 7, 2013. URL: http://www.bz.ru/ru/
news*1,134.html