US hopes for Arctic oil and gas bonanza set back by expert study

By Sheila McNulty in Houston

Published: November 2 2006 02:00 | Last updated: November 2 2006 02:00

The US has overestimated the Arctic's potential as an energy source and must look elsewhere to meet rising demand, according to a study released yesterday by Wood Mackenzie, the international energy consultants, and Fugro Robertson, the geosciences company.

Andrew Latham, Wood Mackenzie's vice-president of energy consulting, said: "This assessment basically calls into question the long-considered view that the Arctic represents one of the last great oil and gas frontiers and a strategic energy supply cache for the US."

 

The report concluded the US could no longer consider the Arctic as a strategic energy source and must look to nations in the Organisation of Petroleum Exporting Countries, such as Venezuela and Russia. It noted that being forced to look outside its borders carried broader, geopolitical concerns relating to security of supply.

The US has long estimated 25 per cent of the world's undiscovered resources are in the Arctic. But Fugro-Robertson's assessment of global "yet-to-find" energy resources is 864bn barrels of oil equivalent.

On this basis, the Arctic's "yet-to-find" potential, of 166bn barrels of oil equivalent, represents a fifth of global potential.

Beyond that, the study said most of those unfound resources were gas, and that the big finds were outside the US.

The study determined 85 per cent of the discovered resources and 74 per cent of the exploration potential was gas. That means there is only about one-quarter of the oil volumes previously assessed in key north American and Greenland basins.

Mr Latham said: "This oil/gas mix is not ideal because remote gas is often much harder to transport to markets. In addition, export and technology constraints are expected to delay production of a large portion of the commercial gas until 2050."

The study determined that the big finds were in Russia and Greenland.

The team said it analysed individual basins and their petroleum reservoirs. Estimates with the US varied because of different modelling tools, though it considered the US approach optimistic.

"While these results are disappointing to the US . . the Arctic still holds great potential for individual oil and gas companies with the advanced technology, money and time to develop the challenging re-sources and build the infrastructure required to transport it," Mr Latham said.

Copyright The Financial Times Limited 2006

 

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