Arctic Has Oil, Natural Gas Potential But Costs, Risks High, Deterring Development
10/21/2009
A recent Department of Energy (DOE) report stated that the Arctic presents a “good news, bad news” situation for oil and natural gas development. The good news is that the Arctic holds about 22 percent of the world’s undiscovered conventional oil and natural gas resources, based on the US Geological Society mean estimate. The bad news is that: (1) the Arctic resource base is largely composed of natural gas and natural gas liquids, which are significantly more expensive to transport over long distances than oil; (2) the Arctic oil and natural gas resources will be considerably more expensive, risky, and take longer to develop than comparable deposits found elsewhere in the world; (3) unresolved Arctic sovereignty claims could preclude or substantially delay development of those oil and natural gas resources where economic sovereignty claims overlap; and (4) protecting the Arctic environment will be costly.
The DOE Energy Information Administration (EIA) report concluded that the high costs, high risks, and lengthy lead-times all can serve to deter their development in preference to the development of less challenging oil and natural gas resources elsewhere in the world. Also, the less abundant Arctic oil resources will be more readily developed than the Arctic’s natural gas resources. Thus, while the Arctic has the potential to be an important source of global oil and natural gas production some time in the future; the timing of a significant expansion in Arctic production is difficult to predict.
This DOE-EIA highlights the need for increased production of alternative fuels. Thus, the production of clean, efficient biofuels and other alternative energy sources will be necessary to meet the world's growing apetite for energy.
