Denmark Eyes North Pole, but How Much Oil and Gas Await?

Countries are looking at the long-term economic potential of the Arctic.
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An iceberg floats near Ammassalik Island, Greenland, in July 2007. As global warming melts polar ice, countries are looking at new possibilities for shipping lanes and drilling opportunities.

Just days before Christmas, Denmark has laid claim to an energy-rich but difficult-to-develop part of the world that's a fount of holiday lore: the North Pole.

The Arctic's fate will take years to decide, but it's attracted increasing interest. Russia plans next year to renew its claim to a huge swath of this bitterly cold area as a way to secure the rights to billions of tons of oil and natural gas.

The reason is simple: As global warming melts polar ice, new possibilities are emerging for expedited east-west shipping lanes and an energy bonanza. The Arctic holds 13 percent of the world's undiscovered oil and 30 percent of its undiscovered natural gas—84 percent of which is offshore, according to a 2008 report by the U.S. Geological Survey.

Like Russia and Canada, Denmark is looking at the long-term economic potential of the North Pole, which sits in the middle of the Arctic Ocean and has months of near total darkness. On Monday, the country made its scientific case to the United Nations that the region is connected to the continental shelf of Greenland, a Danish autonomous territory. Hence, it claims rights to the resources that may lie beneath.

Despite all the interest, "we know very little about the availability" of the Arctic's resources, says Rob Huebert, an Arctic affairs expert at the University of Calgary. He says the region's "hostile" climate has made measurements difficult. Still, as temperatures warm, he says, "it may be possible in the future to pursue them ... People want the oil and gas that may be found within that area."

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The North Pole area could be a challenge to develop because of its cold, remoteness, and lack of land. When energy prices were higher, Shell,* ExxonMobil, and ConocoPhillips acquired leases to develop oil and gas in the Arctic. (Related: "Ice-Breaking: U.S. Oil Drilling Starts as Nations Mull Changed Arctic.")

Yet some of the companies encountered obstacles. In 2012, Shell's drilling rig, the Kulluk, ran aground and needed to be rescued. Since then, especially as oil prices have fallen, several companies have suspended Arctic drilling plans. (Related: "What Happens When Oil Spills in the Arctic?")

The costs of onshore oil and natural gas projects in Arctic Alaska can be 50 percent to 100 percent higher than those of similar projects in Texas, according to a 2012 report by the U.S. Energy Information Administration, which cites the need for specially designed equipment to withstand subzero temperatures.

So despite its promise, an Arctic energy rush—whether onshore or offshore—comes with plenty of uncertainty.

Claiming the North Pole

Under international law, no country owns the North Pole or the Arctic Ocean that surrounds it. The five Arctic countries—Canada, Denmark (via Greenland), Norway, Russia, and the United States—have exploration and resource rights to areas within 200 nautical miles of their coasts. Yet they can seek to broaden their scope.

Denmark has several reasons for pursuing the North Pole. Greenland sees energy and mineral resources as a way to gain independence, because its "entire economy is now subsidized by the Danish parliament," says Charles Ebinger, an energy expert at the Brookings Institution, a Washington-based think tank.

Should Greenland seek independence, National Geographic's geographer Juan Valdes says Denmark will want to bolster the territory's economic future and ensure it retains strong ties.

Denmark is also facing a deadline. In 2004, it ratified the U.N. Convention on the Law of the Sea, which aims to resolve such territorial claims. Signatories have ten years to submit a scientific case for extending their continental shelf beyond the 200 nautical miles. Years ago, Canada made a partial submission and Russia an initial one. Both are expected to make final claims.

To make their case, Danish scientists surveyed the Lomonosov Ridge, a 1,120-mile-long (1,803 kilometers) underwater mountain range that divides the Arctic Ocean into two major basins and extends to a point near the North Pole. They concluded that it's geologically attached to Greenland.

In issuing its submission, Denmark acknowledged that its claims could overlap with those made by the other Arctic nations. The panel investigating the competing claims will decide on their scientific validity.

Nothing will be decided quickly. Since the panel's members are part-time and face a backlog of work, Huebert says they may not get to Denmark's submission for at least five years. Also, if countries are found to have valid but conflicting claims, they will need to negotiate a resolution.

"I expect this to take some time," Danish Foreign Minister Martin Lidegaard told the Associated Press. "An answer will come in a few decades."

The U.S. may miss out entirely. It has yet to ratify the convention and cannot submit its own case until it does.

This inaction is potentially costing the U.S. "a great deal," says Ebinger, adding the country could make a solid case for vastly expanding its areas for fishing and mineral extraction, as well as oil and gas drilling.

Regardless of diplomatic posturing, most Arctic development has occurred so far in Norway and Russia. The two countries had joint projects in the southern Barents Sea that have been partly disrupted by Western economic sanctions on Russia after its invasion of Ukraine's Crimea region earlier this year.

"If oil stays at $60 a barrel, it's not worth their while," Huebert says of the companies seeking to drill in the Arctic.

Ebinger agrees, but he says companies are not looking to make a quick buck. "The oil industry is looking at this as long, long-term investments" that won't likely kick in until the late 2020s.

Whatever the Arctic's lure, "there's a lot we don't know," he says, noting there has not been any broad investigation of its oil and gas potential since the 2008 U.S. study. "It's remarkable how little it's been charted."

*Shell is the sponsor of National Geographic's Great Energy Challenge. National Geographic maintains autonomy over content.

On Twitter: Follow Wendy Koch and get more environment and energy coverage at NatGeoGreen.

The story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

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