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One of the oil and gas industry’s most talked about emerging frontiers—but perhaps least understood in terms of familiar metrics—is the Arctic region. The Arctic refers to a portion of the globe above 66.5o N latitude that is roughly the size of Africa. Encompassing about 6% of the Earth’s surface, the Arctic consists of about one-third land, one-third continental shelf, and one-third waters deeper than 500 m (Budzick. 2009).
The Arctic contains portions of eight countries: Canada, Denmark (Greenland), Finland, Iceland, Norway, Russia, Sweden, and the United States. I cannot imagine any other region on Earth this large that has had so few efforts to explore for, develop, and produce hydrocarbons.
Indigenous people of the Arctic have known for centuries about oil seeps along the coastal plains, and even used pitch as a sealant on canoes. Back in 1789, oil seeps along the Mackenzie River, located within Canada, were reported by Russian settlers in Alaska (Bishop. 2011). Shell geologists first investigated Alaska’s oil potential in 1918. Sub-arctic oil was first discovered in Canada’s Northwest Territories in the 1920s. Russian geoscientists began exploring northern Siberia during World War II, and made their first major oil and gas discoveries there in the early 1960s (Bishop. 2011).
The first US federal lease sale on Alaska’s North Slope was held in 1958, and the first offshore lease sale in the Beaufort Sea in 1979. From the 1960s through the late 1980s, oil was discovered at Prudhoe Bay, gas was discovered in the Barents Sea, and the first exploration wells were drilled in the US Chukchi Sea.
After a period of inactivity due to low oil prices, exploration resumed in Canada’s Mackenzie Delta region in 2000, and in the US portion of the Beaufort Sea in 2005. The 5-month 2010 US moratorium on new deepwater drilling had an adverse impact on US Arctic drilling activity, and political and environmental opposition to Arctic exploration has been tougher since the moratorium was lifted, both in the US and elsewhere.
Nevertheless, due to growing demand and declining production from mature oil fields worldwide, international operators and governments have been initiating new Arctic exploration activities. This past summer, Norway opened a new area in the southeastern Barents Sea to offshore drilling. The service sector is following. Schlumberger and Baker Hughes, for example, opened new bases in the Norwegian town of Hammerfest, on the 71st parallel.
Size of the Prize
Any estimate of Arctic hydrocarbon resources suffers from considerable uncertainty, due to the limited amount of data from wells drilled throughout this enormous region.
In 2008, the US Geological Survey completed the Circum-Arctic Resource Appraisal. The study estimated total undiscovered conventional hydrocarbon resources of 90 billion bbl of oil, 1,669 Tcf of natural gas, and 44 billion bbl of natural gas liquids—a total of 412 billion BOE. That constitutes about 30% of the world’s undiscovered gas and 13% of the undiscovered oil (Bishop. 2011).
Abstract As climate change renders the Arctic increasingly accessible, there has been a substantial uptick in industry interest in the region; it is believed an estimated $100 billion could be invested in the Arctic over the next decade. The Arctic contains vast oil and natural gas reserves—the U.S. Geological Survey estimates the Arctic could contain 1,670 trillion cubic feet (tcf) of natural gas and 90 billion barrels of oil, or 30 percent of the world's undiscovered gas and 13 percent of oil. Energy companies are certain to be at the forefront of Arctic development and investment. Climate change has played an important role in expanding access to the Arctic region, although there have been fewer opportunities to access lower cost oil and gas plays. As conventional production has declined, industry has had to focus more on difficult-to-access and unconventional oil and gas plays throughout the world, including those in the Arctic. Exploration and development in the Arctic requires expensive, tailored technologies as well as safeguards adapted to the extreme climatic conditions. In the wake of the 2010 Deepwater Horizon incident, there have been additional costs associated with emergency response and containment requirements.
Abstract Oil and gas exploration in the Arctic is technically, physically, socially, and environmentally more challenging than in any other environment in the world due to its extreme cold, considerable darkness, mobility limitations, and remoteness, all of which increase operating costs. However, because this region contains approximately 24% of the world's hydrocarbon reserves, the industry will expend whatever effort is needed to overcome the challenges. Since methodologies that reduce environmental and social impacts will also be required, companies must develop strategies that will employ creative, long-term thinking; the disciplines to work with local communities, industry partners, and stakeholders; and the ability to generate safe technical solutions to enable hydrocarbon development. To protect the personnel and environment will also require stringent adherence to regulatory standards. Therefore, a significant part of planning for this region also must be dedicated to dealing with these issues. The difficulties specific to this environment and their mitigation, the merits and limitations of various solutions, and the basic considerations for equipment philosophy will be discussed in this paper. Lessons learned from actual cases will highlight the importance of adequate preparation. Efficient operation in hostile and environmentally sensitive regions is only possible with the proper application of appropriate technologies. This paper explains why particular methods and equipment should be used and why others are less desirable. It lists the lessons learned by one service-company that has operated in arctic conditions for over 50 years. Those lessons involve: Logistics Health and Safety Protection of the environment Sustainability Human factors. The extreme environmental conditions make the discovery and exploitation of hydrocarbon reserves considerably more difficult, and the purpose of this paper is to identify proven solutions to help ensure that operations are safe and efficient. Case histories of the successes achieved and how they were facilitated will be discussed.
The oil and gas industry has demonstrated the ability to drill and develop offshore oil and gas resources in first-year sub-Arctic ice and in shallow-water high-Arctic environments. However, development in deep water (water depths exceeding 100 m) remains a formidable challenge due to small, unpredictable open-water windows and large environmental loads from multi-year ice features. This paper provides an overview of recent projections of undiscovered Arctic hydrocarbon resource potential and the geographical distribution of the resource potential thought to lie in deep water. The unique environmental conditions are summarized along with their impact on the cost of supply outlook for Arctic resources relative to other hydrocarbon supplies. The key technical challenges facing deep-water high-Arctic development are reviewed along with the current industry efforts aimed at meeting the challenges.
According to a 2008 Circum-Arctic Resource Assessment by the U.S. Geological Survey (USGS) (Bird et al., 2008), the Arctic could hold about 22% of the world’s remaining undiscovered hydrocarbons. Resource projections such as these, coupled with diminishing supplies of conventional oil resources and higher oil prices, have resulted in intensified acreage acquisition and exploration activities in the Arctic. Arctic exploration is expanding well beyond the shallow-water depths of current industry production experience, which is limited to bottom-founded structures and gravel islands in depths less than 40 m. In fact, much of the undrilled prospective acreage lies in socalled deep water, that is, beyond the 100-m water-depth contour). The expanding search into the deep-water Arctic is to some extent underpinned by industry confidence that the necessary enabling technology will emerge if the prize is large enough. Such confidence is supported by industry’s long-standing record of overcoming major technological hurdles to safely and economically produce large hydrocarbon accumulations in harsh environmental conditions around the globe.