Greenland’s energy bureau said it’s met “enormous interest” in licensing rounds planned for the next two years as rising oil prices and ice thaw fueled by global warming make Arctic exploration more feasible.
With crude oil rising to a 27-month high of $92.58 a barrel earlier this week and tighter legislation in the Gulf of Mexico threatening to hamper drilling there, oil companies are turning to less hospitable regions. Greenland awarded seven licenses last year to eight companies including Statoil ASA, Royal Dutch Shell Plc and A.P. Moeller-Maersk A/S. Cairn Energy Plc started drilling off Greenland’s west coast last year and said it found oil in one of its wells.
“We are seeing enormous interest from the oil industry in the northeast Greenland licensing rounds of 2012 and 2013,” said Joern Skov Nielsen, director of Greenland’s bureau of petroleum and minerals, at a press conference in Copenhagen today.
Cairn is planning a “multi-year exploration campaign” for oil and gas off Greenland’s shores, said Simon Thomson, a legal and commercial director for the Edinburgh-based company, at the same press conference. Cairn said this week it hired two rigs to drill four wells off Greenland in 2011. The Jan. 4 announcement sent its stock 2.8 percent higher.
Greenland’s north east holds 31.4 billion barrels of oil equivalent while a further 17 billion barrels may lie under the sea floor between Greenland and Canada, according to the U.S. Geological Survey. The Organization of Petroleum Exporting Countries produced 29.2 million barrels of oil a day in December last year, according to Bloomberg estimates.
“We expect to spend $450 million to $500 million drilling in Greenland this year, roughly the same as last year,” Thomson said, adding it will take seven to 10 years after any discovery before oil production can start. The company last year failed to make any commercial finds.
Other companies including Danish state-owned gas and oil company Dong Energy A/S had made six failed attempts at commercial discoveries in the past three decades.
Greenland’s home rule government wants to ensure firms applying for licenses to drill its natural resources have the financial means to pay for the fallout from any spills, Nielsen said.
“Companies applying for licensing round must have a good environmental record,” he said. “They also have to have a lot of money. We want guarantees upfront that you can pay for cleanup and compensation in case of an oil spill.”
In April, an explosion at BP Plc’s Deepwater Horizon rig in the U.S. Gulf of Mexico triggered a record oil spill. Last month, the U.S. Justice Department sued BP, the owner of the rig, Transocean Ltd. and two other companies alleging they violated environmental laws.
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