BL: Greenland Thaw May Replace Dog Sleds With Oil Drills (Update1)
By Tasneem Brogger
March 27 (Bloomberg) -- In Greenland, locals hunt reindeer for food and use dog sleds to traverse the ice sheet. Soon they may be working on offshore rigs and counting their money.
Oil companies have begun looking for crude deposits off the west coast and Joern Skov Nielsen, deputy director of Greenland's Bureau of Minerals and Petroleum, said there may be more oil there than the entire past production of the North Sea. That's about 50 billion barrels, according to figures from Norway and the U.K., the region's biggest producers.
At $100 a barrel, that would be $5 trillion worth -- a potential windfall for the autonomous Danish territory's 56,000 inhabitants that may start paying off in about 15 years.
``This is an epoch-making time, and how we handle it will be of colossal significance,' said Aleqa Hammond, Greenland's minister of foreign affairs and finance. ``Greenland will be a player on the global arena in many more ways than we can even begin to imagine.'
While geologists have known that Greenland had crude reserves since oil was discovered seeping out of rocks along the coast in the 1990s, the ice surrounding much of the world's largest island made getting to it unfeasible.
With crude prices up 63 percent in the past year to about $103 a barrel and the ice melting, the reserves have become potentially more lucrative.
Last October, Greenland's government awarded exploration licenses to Chevron Corp., Exxon Mobil Corp. and Husky Energy Inc. The companies are collecting seismic data to determine the best drilling locations.
Warming
Given the icy conditions, oil production may cost as much as $46 per barrel, according to Oil and Gas Journal. While exploration is complicated by icebergs as tall as 15-story buildings, global warming is helping.
Outside the Disko Bay area off the west coast, there were on average 180 ice-free days a year between 2000 and 2005, up from a 25-year average of 150 days, said Leif Toudal Pedersen, a spokesman at Denmark's Meteorological Institute.
``If the ice in west Greenland continues to melt as dramatically as it has been doing in the past few years, then the cost of producing a barrel of oil will be closer to $20 than $50,' Nielsen said.
There may be even more oil off Greenland's northeast coast, where the U.S. Geological Survey last year reported a possible 31.4 billion barrels. That area is more desolate than the west coast; the largest nearby town is Illoqqortoormiut, population 529.
Pack Ice
Those reserves would represent a greater challenge because the water freezes into pack ice that can be 3 meters (10 feet) thick and thaws enough to allow ships through for one month a year at most.
Though global warming may make that oil accessible at some point, ``the technology actually doesn't exist' yet to explore through the ice, said Hans Kristian Olsen, chief executive officer of NunaOil, Greenland's state-owned oil company.
The prospect of oil revenue is complicating the relationship between Denmark and Greenland, whose ties date back to Viking chieftain Erik the Red, who moved there in 982 A.D. after being banished from Iceland for murder. Legend has it that the island's name was crafted to attract more settlers. Denmark colonized Greenland in the 18th century.
Foreign Policy
Today, the island has limited autonomy. Greenland residents, mostly Inuit natives, in November will vote on a referendum on greater self-governance, a step that the island is taking as part of 2004 agreement with Denmark. Under the proposal, control of foreign policy would shift to the island.
``Greenland was never asked whether it wants to be a part of the Danish realm,' Greenland Premier Hans Enoksen, 51, said in an interview in his office in Nuuk, the capital. ``Any riches that stem from Greenland's oil and mineral exploration must remain inside Greenland.'
Enoksen and Danish Prime Minister Anders Fogh Rasmussen, 55, have agreed for now that half of any future oil revenue will be used to offset the subsidy Denmark gives Greenland each year -- 3.2 billion kroner ($212 million).
When oil revenue is adequate to fund the entire subsidy, perhaps in 15 to 20 years, the two entities will strike a new accord, Nielsen said.
The island will ``try to get the most out of' any final deal, said Family Affairs Minister Arkalo Abelsen, who is among those who hunt reindeer instead of buying meat in shops. ``And it won't be 50-50.'
All this is theoretical at the moment, because no one knows for sure how much oil there is. Nielsen said there's ``a risk' that the comparisons with the North Sea will prove over-optimistic. And politicians expecting oil to ``bubble up from under the water in two to three years' are ``very unrealistic,' said NunaOil's Olsen.
On the other hand, ``if everything goes well' in west Greenland, ``production will be set up in about 12 years,' Nielsen said.
To contact the reporter on this story: Tasneem Brogger in Copenhagen at tbrogger@bloomberg.net
Last Updated: March 27, 2008 06:59 EDT
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