An iceberg off Ammassalik Island in east Greenland. AP.
Here’s an interesting piece of news from Tim Webb at the Guardian about Greenland’s latest pitch to the oil industry: pay us $2 billion dollars, and then you can drill. Greenland — which is divided on whether the recent interest of global companies in its oil and gas resources is a blessing or a curse — has evidently been seriously spooked by the Gulf spill.
And with good cause. A major oil spill in the Arctic would be a hideous mess. Not only would it be ruinous to pristine environments, but getting emergency response to the remote regions where several international companies are interested in doing exploratory drilling would be expensive and slow in the region’s harsh conditions. And it would be a race against time to cleanup or fix a leak in a the short window of summer before the oceans freeze back over as they do every year. (Read “Will the Arctic Oil Rush Be Spoiled By A Spill?”)
Granted, the recent drilling that has been done off Greenland has not been as risky as what was being done by BP, chiefly because it wasn’t as deep. The Edinburgh-based Cairn Energy drilled off Greenland’s coast this summer without any significant findings. (Here’s my post this summer on Cairn.) But the activity was nevertheless watched carefully, and the fact that it went off without a hitch should give both the Greenland government and other oil companies some confidence in pressing ahead in a region that could hold billions of gallons of untapped oil. USGS has estimated there could be as much as 18 billion barrels off the island’s west coast, where the next licenses are being awarded, and the Greenlandic government thinks there could be over 30 billion more off the northeast coast, where licensing is expected to start in a few years time.
Will the bond request stop the momentum? Maybe not. Webb writes that while Greenland’s latest round of block licensing, which were scheduled to be announced in August, was held up because of the proposal, but that they could to be awarded early next week. Companies that get licenses have exploratory rights for 10 years, and if they find something in their block, the right to an exploitation license for the next 30 years.
Webb writes:
The payment – either in the form of a parent company guarantee for the larger companies or a straight advance – would have to be made once companies were awarded a licence to explore a block. This is despite the fact that actual drilling would not take place for another three or four years because of the mapping and geological preparatory work that would have to be carried out.
Such a requirement could exclude smaller deepwater exploration companies that have less financial clout because they do not bring in their heavyweight partners until they start drilling. Companies that have bigger balance sheets and less deepwater expertise could be favoured in the process. No final decision has been made on the bond payment requirements but it seems likely that it will remain in place, despite some companies’ protests.
What’s interesting is the potential precedent that this could set. It’s probably not one that oil companies are going to relish, but this time, they can’t say they didn’t see it coming.