Exploring Arctic oil and gas
Challenges to Arctic resource recovery
The region above the Arctic Circle accounts for only about 6% of the Earth’s surface area, but it could account for as much as 20% of the world’s undiscovered but recoverable oil and natural gas resources.
The existence of hydrocarbon resources in the Arctic has been known for decades, but only in recent years has the opening to full-scale resource development and navigation — such as the fabled Northwest Passage that would connect the Atlantic and Pacific Oceans, or the Northern Sea Route that will connect Europe and western Russia with eastern Russia and Asian markets — become technically and economically feasible.
In 2008, the United States Geological Survey (USGS) released the first-ever wide-ranging assessment of Arctic oil and gas resources, estimating the region’s undiscovered and technically recoverable conventional oil and natural gas resources.
Potential Arctic oil and gas resources
(total assessed resources = 412 billion boe)
Source: EY calculations from US DOE and US GS data
Facing the challenge of Arctic drilling
The quest for Arctic oil and gas resources is not for the faint of heart, nor for those with less-than-deep pockets. Rather, Arctic resource development is both high-cost and high-risk. More specifically, the major challenges include:
- Harsh climate
- Limited existing infrastructure
- Gas-on-gas competition
- Exceptionally long project lead times
- Spill containment/spill recovery
- Overlapping/competing economic sovereignty claims
- Country-specific environmental laws/regulations
Source: U.S. Energy Information Administration and U.S. Geological Survey