It has been estimated by the US Geological Survey that the Arctic could contain 90 billion barrels of oil equivalent, and as drilling technologies have improved the race to access these reserves has grown more frantic.
Norway is perfectly positioned to explore the Arctic, and with its decades of experience operating in the North Sea it is also one of the few countries whose oil companies are truly prepared for the dangers that the freezing Arctic waters hold.
In what will be a breakthrough in cooperation following a diplomatic row over the 2010 Nobel Peace Prize being awarded to Chinese dissident Liu Xiaobo, Norway is now considering a decision to begin a joint venture with Chinese state oil firm CNOOC to explore for oil in the waters between Iceland and Norway's Jan Mayen island.
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Still trying to recover from the 2008 financial crisis which crippled the country's banking sector and much of the economy, Iceland has been keen to develop its natural resources as a new means of revenue with which to spur the growth of the economy. Two licenses have already been awarded in the Dreki area in January, and in June CNOOC became the first Chinese company to win a license to search for oil in the Arctic.
Norway, thanks to a treaty signed in 1981 over the control of and rights to the continental shelf between Iceland and Jan Mayen, may take a 25% stake in all exploration licenses issued by the Icelandic government, and now it must decide whether it wants to work with China on one of those licenses.
Gudni Johannesson, the director general of Iceland's National Energy Authority, has said that they "expect an answer from the Norwegian authorities in the last week of November," over whether or not they plan to team up with CNOOC on an exploration license. When asked by Reuters if the previous diplomatic conflict has hindered discussions, he said that "it has been a quite normal administrative process."
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After Norway's conservative government took office last month China announced that it was up to them to try and repair the damaged relationship, which has prevented Statoil from partaking in shale gas exploration in China. Perhaps this partnership is a part of the make-up process, or a sign that the relationship is already back on track.
The Norwegian Petroleum Directorate surveyed the region just off the coast of Jan Mayen and estimate that it could hold 566 million barrels of oil equivalent.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com More