In 2012, following several years of economic crisis, a mountain of debt, and ultimately a currency crisis, Iceland was looking for ways to diversify its economy. The tiny island-nation had become massively overextended into international finance, and needed to develop other industries.
Add to that the fact that Iceland is a huge importer of fossil fuels. The volcanic island is abundantly rich in energy resources that can be used for electricity. It has more geothermal and hydropower than it knows what to do with, making its electricity sector one of the cleanest in the world. However, it hasn’t developed indigenous fossil fuel resources, forcing it to resort to costly imports for its transportation sector. As a result, there is a big motivation in Reykjavik to develop offshore oil and gas.
Another Arctic Producer?
Iceland would be one of a just a handful of countries looking to drill above the Arctic Circle. Royal Dutch Shell (NYSE: RDS.A) is currently drilling an exploratory well in the American Arctic. Russia’s state-owned firms are further along in their Arctic territory. Norway’s Statoil (NYSE: STO) is also drilling in the far north.
There are good reasons to think that Iceland has oil and gas potential. The key reason is the Jan Mayen Ridge, which once connected Greenland and Norway. Around 55 million years ago, the seafloor began separating, which pushed East Greenland, Western Norway, and the Shetland Islands away from each…