U.S. has significant interests in untapped mineral wealth in Arctic
According to the U.S. Geological Survey, the Arctic region is the largest unexplored prospective area for petroleum remaining on earth with an estimated ninety billion barrels of undiscovered oil reserves, and 1,670 trillion cubic feet of natural gas. In addition, the unpredictability of the Persian Gulf region makes the Arctic region even more attractive for exploitation.
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The U.S. Geological Survey estimates that the Arctic might hold as much as 90 billion barrels (13 percent) of the world’s undiscovered oil reserves and 47.3 trillion cubic meters (tcm) (30 percent) of the world’s undiscovered natural gas. At current consumption rates and assuming a 50 percent utilization rate of reserves, this is enough oil to meet global demand for 1.4 years and U.S. demand for six years. Arctic natural gas reserves may equal Russia’s proven reserves, the world’s largest.1 (See Table 1.)
The Russian Ministry of Natural Resources estimates that the underwater Arctic region claimed by Russia could hold as much as 586 billion barrels of unproven oil reserves.2 The ministry estimates that proven oil deposits “in the Russian area of water proper” in the Barents, Pechora, Kara, East Siberian, Chukchi, and Laptev Seas could reach 418 million tons (3 billion barrels) and proven gas reserves could reach 7.7 tcm. Unexplored reserves could total 9.24 billion tons (67.7 billion barrels) of oil and 88.3 tcm of natural gas.3 Overall, Russia esti- mates that these areas have up to 10 trillion tons of hydrocarbon deposits, the equivalent of 73 trillion barrels of oil.4
In addition to oil and gas, the Arctic seabed may contain significant deposits of valuable metals and precious stones, such as gold, silver, copper, iron, lead, manganese, nickel, platinum, tin, zinc, and diamonds. The rise of China, India, and other developing countries has increased global demand for these commodities.5
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In 2008, for the first time in 17 years, the U.S. Minerals Management Service began selling oil and gas leases for drilling rights in the Outer Continental Shelf to meet escalating energy demand.58 U.S. and interna- tional corporations are flocking to the High North. Arctic development is generating considerable revenue for the U.S. government. British Petroleum is pursuing the Lib- erty Development Project, a drilling project in the OCS. In February 2008, Royal Dutch Shell paid $2.1 billion for 275 lease blocks in the Chukchi Sea Lease Sale 193. A total of seven companies partici- pated in the Chukchi Sea lease sale, which spans an area covering 5,354 blocks.59 In October 2009, the Interior Department approved two leases to Shell for exploration in the Beaufort Sea,60 conditioned on meeting strict environmental standards.61
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One future change in the Arctic region is greater accessibility to, and availability of, natural resources, including offshore oil and gas, minerals, and fisheries. The Arctic contains 10 percent of the world’s known petroleum reserves and approximately 25 percent of its undiscovered reserves.18 The U.S. exclusive economic zone has a potential thirty billion barrels of oil reserves and 221 billion cubic feet in natural gas reserves.19 Minerals available for extraction in the Arctic include manganese, copper, cobalt, zinc, and gold. Coupled with a rise in global demand for natural oil and gas resources and improved accessibility, the Arctic has become a new focus for oil companies looking for untapped resources. Already $2.6 billion has been spent on active oil and gas leases in the Chukchi Sea.20 Yet the extraction of these minerals and petroleum reserves depends heavily upon development and deployment of resilient technology that can function in such harsh conditions, marked by lack of infrastructure and long distances to markets.
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Determination of who owns the Arctic Ocean and any resources that might be found beneath those waters will have significant economic implications. The U.S. Department of Energy predicts a decline in petroleum reserves and, despite oil prices topping $146 in June 2008, the demand for oil is growing.6 In addition to the vast mineral resources, the unpredictability of the Persian Gulf region makes the Arctic region even more attractive for exploitation. Russia and Norway have already submitted their claims to the Commission on the Limits of the Continental Shelf (“the Commission”), while Canada and Denmark are collecting evidence to prepare their submissions in the near future.7 All of these nations can gain considerable oil and gas resources as a result of the Convention.
However, one Arctic state has so far failed to join the race. Unlike the other Arctic nations, the United States has not ratified the Convention. Although the United States has complied voluntarily with the Convention, the failure to ratify the Convention could foreclose its ability to tap into potential energy resources. This failure could prevent significant contributions to American energy independence, and increase security threats. Thus, the best way to guarantee access to the Arctic’s resources and to protect other economic and non-economic interests is for the United States to become a party to the Convention.
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According to the U.S. Geological Survey, the Arctic region is the largest unexplored prospective area for petroleum remaining on earth.21 The agency estimated that the Arctic may hold as much as ninety billion barrels of undiscovered oil reserves, and 1,670 trillion cubic feet of natural gas.22 This would amount to 13% of the world’s total undiscovered oil and about 30% of the undiscovered natural gas. With an average consumption rate of eighty six million barrels per day, “the potential oil in the Arctic could meet global demand for almost three years.”23 The Arctic’s potential natural gas resources are three times bigger, which is equal to Russia’s gas reserves, which are the world’s largest.24
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The economic importance of the energy resources trapped under the Arctic seabed is difficult to overstate. In 2007, Alaska produced 722,000 barrels of oil per day.96 This is only a fraction of the state's 1988 production peak of 2,017,000 barrels of oil per day.97 Today, Alaskan oil production accounts for more than sixteen percent of all U.S. production; in 1988, it was more than a third. Natural gas is a significant energy resource in Alaska (433.5 billion cubic feet are marketed from Alaska per year) but contributes only 2.2% to the U.S. market.98 U.S. Arctic oil exploitation pales, however, in comparison with that of the other Arctic nations.99 Norway, for instance, has produced dramatically more oil from its Arctic sea beds than the United States has over similar periods. In 2007, Norway produced 2,564,884 barrels of oil per day compared to Alaska's mere 722,000 barrels per day; approximately 500,000 barrels per day more than Alaska's 1988 peak.100 The other Arctic nations each produce significant quantities of oil as well.101
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Shrinking ice caps, melting permafrost, and technological advances enable greater access to the region’s abundant oil and gas reserves, which include as much as one-fifth of the undiscovered petroleum on the planet. With longer ice-free periods now available to explore for hydrocarbons, a new scramble for oil and gas could occur especially if oil prices recover to levels above $100 per barrel. In July 2008, the U.S. Geological Survey (USGS) estimated that the Arctic comprises 30 percent of the world’s remaining natural gas resources, or 44 billion barrels, and 13 percent of untapped oil supplies, or 90 billion barrels. Nearly all (84 percent) of the oil and gas is expected to occur offshore, and most of the projected reserves are located in waters less than 500 meters deep and will likely fall within the uncontested jurisdiction of one or another Arctic costal state. “The extensive Arctic continental shelves may constitute the geographically largest unexplored prospec- tive area for petroleum remaining on Earth.”7 The Arctic already accounts for one-tenth of global conventional petroleum reserves, and the projections of the latest USGS study did not even ad- dress the potential for developing energy sources such as oil shale, gas hydrates, and coal-bed methane, all of which could be present. But with it comes the risk of increased pollution, pos- sible spills from oil and gas, and the threat of contaminating water sources during the extraction process.
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It also includes massive oil and gas deposits—the main reason the region is so economically promising. Located primarily in western Siberia and Alaska’s Prudhoe Bay, the Arctic’s oil and gas fields account for 10.5 percent of global oil production and 25.5 percent of global gas production. And those numbers could soon jump. Initial estimates suggest that the Arctic may be home to an estimated 22 percent of the world’s undiscovered conventional oil and gas deposits, according to the U.S. Geological Survey. These riches have become newly accessible and attractive, thanks to retreating sea ice, a lengthening summer drilling season, and new exploration technologies.
Private companies are already moving in. Despite high extraction costs and regulatory hurdles, Shell has invested $5 billion to look for oil in Alaska’s Chukchi Sea, and the Scottish company Cairn Energy has invested $1 billion do the same off the coast of Greenland. Gazprom and Rosneft are planning to invest many billions of dollars more to develop the Russian Arctic, where the state-owned companies are partnering with ConocoPhillips, ExxonMobil, Eni, and Statoil to tap remote reserves in Siberia. The fracking boom may eventually exert down- ward pressure on oil prices, but it hasn’t changed the fact that the Arctic contains tens of billions of barrels of conventional oil that will one day contribute to a greater global supply. Moreover, that boom has also reached the Arctic. Oil fracking exploration has already begun in northern Alaska, and this past spring, Shell and Gazprom signed a major deal to develop shale oil in the Russian Arctic.
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Then there are the minerals. Now, longer summers are providing additional time to prospect mineral deposits, and retreating sea ice is opening deep-water ports for their export. The Arctic is already home to the world’s most productive zinc mine, ￼￼￼￼￼￼￼￼￼￼Red Dog, in northern Alaska, and its most productive nickel mine, in Norilsk, in northern Russia. Thanks mostly to Russia, the Arctic produces 40 percent of the world’s palladium, 20 percent of its diamonds, 15 percent of its platinum, 11 percent of its cobalt, ten percent of its nickel, nine percent of its tungsten, and eight percent of its zinc. Alaska has more than 150 prospective deposits of rare-earth elements, and if the state were its own country, it would rank in the top ten in global reserves for many of these minerals. And all these assets are just the beginning. The Arctic has only begun to be surveyed. Once the digging starts, there is every reason to expect that, as often happens, even greater quantities of riches will be uncovered.
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According to a 2008 assessment by the U.S. Geological Survey (USGS), “the total mean undiscovered conventional oil and gas resources in the Arctic are estimated to be approximately 90 billion barrels of oil, 1,669 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids.”17 The overwhelming majority of these resources—84 percent—is expected to occur in offshore areas. Over 70 percent “of the mean undiscovered oil resources is estimated to occur in five provinces: Arctic Alaska, Amerasia Basin, East Greenland Rift Basins, East Barents Basins, and West Green- land-East Canada.”18 Similarly, over 70 percent “of the undiscovered natural gas is estimated to occur in three provinces: the West Siberian Basin, the East Barents Basins, and Arctic Alaska.”19 Arctic Alaska, the Amerasia Ba- sin, and the North Chukchi-Wrangel Foreland Basin provinces, portions of which could be claimed by the United States, account for over 40 million barrels of oil, 284 billion cubic feet of natural gas, 6.5 million barrels of natural gas liquids and 94 million barrels of oil and oil-equivalent natural gas.20 The value of these resources is estimated to be in the trillions of dollars.21