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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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A New Geopolitical Conflict Is Looming Over The Arctic

The Arctic has been the source of geopolitical conflict and territorial disputes for centuries. From walrus ivory and seal skins starting in the middle ages to coal, oil, and gas today, the Arctic is a veritable treasure trove of resources. But it’s also one of the most fragile and most vital ecosystems on Earth. 

First founded in 1996, the Arctic Council is comprised of eight nations: Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United States. While these members represent a huge range of interests, priorities and concerns -- many of which conflict -- all Arctic nations are concerned with sovereignty and security, resources and development, shipping routes, and environmental conservation. Those oft conflicting priorities, however, are coming to a head against the backdrop of global warming. 

Just last month, the United Nations and the Intergovernmental Panel on Climate Change (IPCC) sounded a “code red for humanity” and announced that we have reached a point of no return for climate change, having already irreversibly altered the climate due to human pursuits. What’s more, the Arctic, which contains shrinking ice caps which are essential to regulating the Earth’s temperature and reflecting sunlight, is heating up faster than any other place on Earth.

As the ice caps melt, new shipping routes are opening up in icy northern waters, and some nations and industries are taking these newly navigable seas as an invitation to scale up oil and gas exploration in the region that is disappearing thanks to those very same fossil fuel sectors. “Tragically, the Arctic is estimated to include 13% of the Earth’s oil reserves and a quarter of its untapped gas reserves,” Barron’s reported this week. “The untapped reserves in the Russian region alone have an estimated value of $35 trillion. Little wonder, President Putin is offering $300 billion of incentives for new projects.”

Putin’s increased activity in the Arctic has raised the hackles of other Arctic Council nations, and in the past U.S. officials have accused the Kremlin of militarizing the region. Russia isn’t the only nation poised and ready to expand its political and industrial presence in the Arctic, however. China, too, has made moves to open up a “polar silk road” between Asia and the West.

Currently, hundreds of ships are crowded around the Arctic Coast near Russia’s Gydan Peninsula in order to deliver construction materials for new oil and gas extraction operations. While other nations have begun to move away from fossil fuels and diversify their energy economies in the face of climate change and the global green energy transition, Russia seems dead-set on selling the world’s very last barrel of oil before it will even consider decarbonization.

This plan is controversial to say the least. The imperative to protect Arctic ecosystems may cause nations like Denmark and Norway to come to blows with Russia according to Barron’s. But that would only be likely in the case of an extreme acceleration of Arctic fossil fuel extraction. For now, it’s unclear whether Arctic exploration will even be financially viable. Global oil prices are relatively low and they will surely get lower as the global economy moves further away from emissions-heavy fuel sources. What’s more, the giants of the banking industry have been steadily divesting from Arctic oil and gas projects over environmental concerns for years now.

Tensions in the Arctic may fizzle out on their own as demand for oil and gas tapers off. But if not, the region could be a geopolitical powderkeg. And the nations who could light the fuse, namely Russia and China, are not necessarily known for their diplomatic restraint.

By Haley Zaremba for Oilprice.com

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  • Mamdouh Salameh on September 02 2021 said:
    Oil and gas will continue to drive the global economy throughout the 21st century and probably far beyond, hence the growing importance of the Arctic.

    It is estimated that the Arctic contains 13% of the earth’s oil reserves and a quarter of its untapped gas reserves. Crude oil reserves in the Russian Arctic alone are estimated at 17 billion tons of oil (equivalent to 124.6 billion barrels of oil) while natural gas reserves are estimated at 85 trillion cubic metres (3004 trillion cubic feet) based on current extraction technology according to Russia’s Ministry of Natural Resources. The untapped reserves in the Russian region alone have an estimated value of $35 trillion.

    The Arctic is, in my opinion, Russia’s ‘Wild West’ to borrow a phrase from America’s history. President Putin has long ago recognized the great importance of the Arctic for the Russian economy and the Russian oil industry. That is why he has been pouring hundreds of billions of dollars into the region. Thanks to the Arctic, Russia will maintain its position as the world’s energy superpower throughout the 21st century. It is very possible that the very last barrels of oil will come from Iraq, Venezuela and the Russian Arctic.

    Despite the most intrusive US sanctions since 2014, Russia has achieved great success in the development of the oil and gas resources in the Arctic with the Vostok oil project being the cornerstone of Russia’s Arctic ambitions.

    Russia’s success is exemplified by Russian LNG giant Novateck’s. Novatek plans to build out its LNG export capacity up to 70 mtpa by 2030. This, in turn, dovetails into Russia’s plans for LNG production of 80-140 mtpa by 2035, which would be greater than that of the world’s two largest producers Qatar and Australia.

    Moreover, it will be possible to deliver LNG into northeast Asian and European markets via the North Arctic Route (NAR)on a sustained basis for ‘a little over’ $3 per million British thermal units (MMBtu).

    By year 2024, Russia intends to boost oil shipments on the NAR to 80 million tons per year (1.61 million barrels a day) and by 2030 - to 150 million tons (3.0 mbd).

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Bu siness School, London

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