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Mining The North Pole: Oil Companies Taking On The Arctic

Article illustrative image Partner logo A polar bear lost

A polar bear roams through the industrial wasteland of London, wandering among the traffic jams whilst a Radiohead song plays in the background. It searches through bins, sniffs exhaust pipes, and ends up lost in a filling station before finding itself in a park, where Jude Law urges us to "Join the movement. Save the Arctic." The bewildering video of this "climate change refugee" was uploaded by Greenpeace on June 21, in the run up to the Rio + 20 Earth summit, along with a global petition to stop oil drilling in the Far North.

To this day, more than two million people have signed it. Without a doubt, Total's CEO is not one of them. Christophe de Margerie did, however, surprise everybody in September by declaring to the Financial Times that his company would never go and search for black gold under the ice.

"The discovery of oil in Greenland would be a disaster. An oil slick would really harm the company's image," he said. Whether it is just a coincidence or a well-oiled communications strategy, his declaration came on the day Paris' Court of Cassation (France’s court of last resort) found Total guilty in the Erika case -- when the company's ship sank off the west coast of France in 1999, causing a major environmental disaster.

The Arctic has become the new "hunting ground" for the major oil companies. They have been meticulously planning their escapades ever since the United States Geological Survey (USGS) announced, in 2008, that 22% of the world's undiscovered oil and natural resources could be found in the north of Alaska, in Greenland and in Russian waters.

Shell has acted as "a pioneer" by obtaining, in 2012, the green light from U.S. administrators to drill in the Far North. This summer, the Anglo-Dutch giant -- which has already invested 3.5 billion euros in the region without even getting one barrel in return -- has started preparation work in the Beaufort Sea and the Chukchi Sea in Alaska. However, the company suspended some operations, due to the risk of oil slicks.

Virtuous Total, adventurous Shell?

However, the French company has not ruled out finding oil and gas in "open seas." "From this viewpoint, our strategy has not changed," says Patrice de Viviès, the group's director of exploration and production in the North Sea. The Arctic is hardly the "Holy Grail" after all. "Since 2008, we have witnessed a revolution in the oil industry," he says, citing as examples: "The enormity of unconventional gas and petrol production in the United States, extremely important discoveries in Brazil, developments in eastern Africa..."

Why brave the darkness, the bitter cold and the hundreds of kilometers without infrastructure for something that is not even making a profit yet? The oil companies' enthusiasm for the Arctic has not melted quite as fast as the ice fields; however, it is the time for caution. It is clear the Arctic is no big bonanza for the global petroleum industry.

In July, British Petroleum (BP) stopped mining the Liberty deposit in the north of Alaska because it was too costly and too risky. Six months earlier, the company ended its agreement with Russia's Rosneft over Sakhaline 4. For security reasons, Gazprom has just postponed, until 2013, its work in Prirazlomnoye, the first offshore deposit in the Russian Arctic. The flagship project with Total in the Barents Sea in Norway, named Chtokam (with its 3,800 billion cubic meters of gas) is still holding out for brighter days. Estimated at $15 billion a few years ago, it will actually cost $30 billion before the first cubic meter of natural liquefied gas arrives on the market.

In Norway, the government is divided. When the Minister of Petroleum and Natural Gas recently declared that he supports exploring the Far North, the head of government, Jens Stoltenberg dryly responded: "It is out of the question to start drilling the North Pole." A moratorium on drilling in the most fragile areas will last until 2015.

Is it worth it?

USGS has estimated that the Arctic's oil reserves amount to 90 billion barrels; which represents no more than three years of global consumption. According to the Norwegian department of statistics and Cicero (the Centre for International Climate and Environmental Research), its share of the world's oil supply will not surpass 8-10% in 2050. However, the importance of the Arctic as the world's supplier of gas will decline due to enormous extraction costs as well as the competition from the United States and the Middle East.

In 2012, the Arctic is melting at a faster rate than ever before and it currently spans an area half the size of what it was thirty years ago. Environmentalists fear that it is so easy to drill and transport oil from the Arctic that this will whet the appetite of the oil giants. Greenpeace is at the vanguard, however, demanding that the large region surrounding the North Pole be declared "a protected natural area" by the United Nations (U.N.), like the Antarctic, and that the exploration for oil should be prohibited to a greater extent in the same manner as industrial fishing. Even an organization that is open to drilling in the sea, like Pew Environment Group, says that at least two or three years of extra research are necessary before drilling can eventually start.

Greenpeace has claimed the Total decision as its first victory and its campaign has been backed by numerous media personalities such as English entrepreneur Richard Branson and actors Robert Redford, Penélope Cruz and director Pedro Almodóvar among others. Paul McCartney joined the movement quite early on: "At any given time, in any given place, we have to be determined. I believe that the time has come, and that this place... is the Arctic." However, are the words of a singer really enough, even if he is one of the Beatles?

The games have begun, and all the oil giants are placing their pieces on the board: Shell, BP, America's ExxonMobil, Chevron and ConocoPhillips, Italy's Eni and Norway's Statoil. There is also Rosneft, like Gazprom, which is up there with the others. Strategic partnerships are already being formed; especially with Russia, which possesses 41% of petrol and 70% of gas in the Arctic. Rosneft recently met with BP, under the auspices of Vladimir Putin.

In spring 2013, Shell will once again resume activities in the Beaufort Sea to drill a dozen exploration wells. "It is an exciting time for both Alaska and for Shell," it says on the company's website. Greenpeace's ecowarriors, preparing their assault on the drilling ships, are relying on the support from high-profile celebrities. The polar bear still has some sad days ahead. 

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