Melting Arctic Ice May Unlock Energy, Ore And Shipping Lanes
Faster shipping, vast new energy resources -- what's not to love about the melting ice cap?
finance.yahoo.com
Whether it's from global warming or natural cycles, the seas near the Arctic Circle have been mostly open to shipping traffic since 2007 -- though ice levels unexpectedly rose last summer. Ships are hindered only by seasonal ice floes that are getting easier to penetrate.
"You can argue about the causal factors but there's no question that the Arctic is melting," said Rob Huebert, associate director of the Center for Military and Strategic Studies at the University of Calgary.
Companies and countries are waking up to the commercial opportunities.
"The world is realizing that there's another underutilized ocean and a treasure trove of resources out there," Huebert said.
The grab for oil and materials in these frigid wastes is also stirring territorial disputes and a build up of Arctic military capabilities by various nations. The House Foreign Affairs Committee has set a March 25 hearing on how climate change could affect Arctic security.
Northwest Passage
The Arctic takes in the northern reaches of Canada, Russia, Alaska, Greenland and Scandinavia, covering one-sixth of the earth's surface.
One of the biggest business upsides is that the fabled Northwest Passage linking Europe with Asia is now a reality. Explorers centuries ago hunted for a route through the Arctic Ocean along the northern coast of North America to Asia. But they couldn't break through the solid ice near the North Pole.
Now, a large part of the year-round ice is gone. This is opening shipping lanes that may alter global trade patterns and manufacturing in a big way. About 12-20 vessels are passing through the Northwest Passage annually. An estimated 200 have already made the trip.
The day may not be far off when cargoes of finished goods from China sail through the Arctic to Europe, saving time and fuel.
Arctic expert Rockford Weitz cites studies by U.S. government agencies and others that predict the permanent ice sheet that covers the top of the world may largely disappear by 2020. "Some say it may happen by 2013 -- which is only four years away," Weitz said.
The credit crunch and territorial claims by interested nations may temporarily stymie use of the Arctic. But many experts say it's an idea whose time has come.
"Airlines fly over the Arctic all the time; maritime ships never tried because of the ice -- that will change," Weitz said.
Weitz leads the Arctic Futures Initiative, an executive consulting service that advises on Arctic issues. He says moving cargo from China or Japan to Europe via Russia's Arctic Sea route could lop 20%-24% off the distance from regular routes.
Products, parts and resources will move faster, changing the global supply chain for the better.
"You can shorten distribution times and the amount of inventory stored in advance," Weitz said.
Big energy and mining firms from the U.S., Russia, Canada and Scandinavia are building or eyeing Arctic port facilities that would have been blocked a few decades ago.
Such ports make it easier to access, process and remove a mother lode of oil, gas, mineral and fishery resources from the Arctic. Until now, the bulk of these resources moved from north to south by truck or pipeline until they reached a useable port or railhead.
Heating Up Energy
The U.S. Geological Survey estimates the Arctic holds up to 90 billion barrels of untapped oil. They also reckon the region holds as much as 1.6 trillion cubic feet of natural gas and 44 billion barrels of liquid natural gas. Those gas reserves would equal all the proven reserves in (non-Arctic) Russia.
Oil-bearing sands in Canada's Arctic promise another source of energy if cost-effective ways to extract it can be found given the current volatility in oil prices.
"It's feasible to extract Athabasca oil sands if oil is at $60 a barrel, but not at $40 a barrel," said energy consultant Kevin Coates.
Oil prices rose $3.47 to $51.61 on Thursday, the highest close since Nov. 28. The sharp drop from last July's peak above $147 has cooled plans to exploit Arctic energy and other resources. But analysts say interest will rebound once the world economy recovers.
A 2007 Russian government report estimated that there's nearly $2 trillion worth of mineral ore just in Russia's portion of the Arctic.
Big mines already operate in Canada, Alaska and Russia near the Arctic Circle.
Norilsk Nickel, the world's largest nickel miner, operates in the Russian Arctic. It ships its ore via the Kara Sea, which is part of the Arctic Ocean north of Siberia.
Alaska's Red Dog Mine is the world's largest zinc operation. It's just north of the Bering Strait and is run by mining company Teck Cominco (NYSE:TCK - News).
Greenland, a partly autonomous part of Denmark, is another potentially mineral-rich area. The glacier that covers the island is receding, allowing for intensive surveying.
Gazprom, the world's biggest gas company, is one of the biggest players in exploiting Arctic energy resources. So is Lukoil (Other OTC:LUKOY.PK - News), Russia's largest oil company.
Chevron (NYSE:CVX - News), Royal Dutch Shell (NYSE:RDS-A - News) and Exxon Mobil (NYSE:XOM - News) have long been involved in developing energy reserves in Alaska and other Arctic areas. Pioneer Natural Resources, a large Dallas-based independent oil and gas producer, also invests heavily in Alaska.
Shell, French oil firm Total (NYSE:TOT - News) and Chevron are developing the Shtokman field in Russia's Arctic, one of the world's largest natural gas fields, with Gazprom. And Norway's national company Statoil is engaged in various oil exploration and technology projects in the Arctic.
Analysts say much of the gas and oil in the Arctic is underwater, requiring complex offshore drilling technology -- something that Norwegian and Russian firms excel at.
Timber And Fish, Too
Russia also boasts huge timber reserves in Siberia and other northern areas. The nation's backward roads made it hard to extract this lumber. But analysts say shipping it to Asia and Europe through Arctic seas is viable. The rivers in these timber-rich areas all run north. So logs could be floated by river to the Arctic Ocean where they could be picked up by ships.
On the fishery side, the parting ice up north is revealing a bonanza of cod, Alaskan pollock, Arctic char and other species. With once-rich fishing grounds in Europe, Asia and the U.S. depleted, Arctic seas offer new sources of fish and other sea food. Most fish sold at U.S. fast-food outlets comes from Arctic waters.
But legal disputes regarding ownership of the Arctic resources and sea lanes are heating up.
Russia, Norway, Canada, the U.S. and others are laying claim to Arctic assets. Huebert says they're also quietly beefing up submarine and other naval capability in Arctic waters.
One sticking point 19 the Northwest Passage. The U.S. maintains that the route lies in international waters, while Canada says it belongs to them.
Under the Law of the Sea Treaty defining national rights in using the world's oceans, nations have the right to extend their exclusive economic zones from 200 miles to up to 350 miles offshore if they can prove that these underwater areas are part of their continental shelf. The U.S. is yet to ratify the treaty.
Weitz says the potential for disputes is underscored since the Arctic Ocean has the longest continental shelf of any ocean in the world.
Anne Korin, a co-director of the Institute for Global Security in Washington, D.C., says such disputes are becoming common in a world where governments are tussling to control energy or other resources.
She warns that multinationals may hesitate to invest more capital in Arctic ventures until the issue of "who owns what" is settled. |
