Greenland Targets $4 Billion in Offshore Funds to Double GDPPeter Levring and Omar R. Valdimarsson
Greenland is looking for investors from the U.S. to Asia as the world’s largest island targets $4 billion in funds that the government predicts will allow the economy to double in size over the next decade.
Investors with “the biggest risk appetite come from the east,” Business Minister Jens-Erik Kirkegaard said in a Jan. 13 phone interview from Nuuk, Greenland’s main city. “We welcome European and North American money just as much as investments coming from the Far East. We don’t have any priority.”
The world’s most sparsely populated nation and home to some of the globe’s biggest untapped fossil fuel and mineral reserves says the strategy will help it win independence from Denmark, which still counts Greenland as part of its kingdom. The home rule government is now trying to explain the risks and political landscape to prospective investors, according to Kirkegaard.
“We’re telling them about Denmark, Greenland and who does what and makes the decisions,” he said. “That’s very important for someone like the Chinese to know.”
The government has already shown willingness to adjust its rules to accommodate investors, lifting a ban on uranium mining. The local parliament is working on legislation that will allow London Mining Plc to develop a 14 billion-krone ($2.56 billion) mine at Isua, north of Nuuk, as well as a 3 billion-krone Lemon Fjord zinc project.
Kirkegaard said the country is working to cement its relations with the Chinese mining industry as well as financiers such as China Development Bank Corp. The world’s second-largest economy is the biggest consumer of metals.
The government last month also awarded BP Plc, ConocoPhillips, Royal Dutch Shell Plc., Dong Energy A/S and Statoil ASA licenses to drill off its east coast, which cuts through the Arctic Circle. Greenland will award more east coast licenses in 2014, he said.
Finance Minister Vittus Qujaukitsoq said in a separate interview that the country hopes to begin formal talks with Alcoa Inc., the largest U.S. aluminum producer, on building a smelter. During a visit to Iceland, “we had some informal meetings with some representatives of Alcoa,” he said in an interview in Reykjavik. “Hopefully Alcoa will come to the government and continue the negotiations that we have anticipated for a long time.”
Greenland holds some of the biggest untapped deposits of rare earth elements, used in the manufacture of goods as varied as mobile phones, batteries, wind turbines and hybrid cars. The island also holds deposits of uranium, gold, rubies, copper, zinc and iron ore. The plan is to have five or six mines operational in the next five to seven years, Kirkegaard said.
Greenland’s goal of allowing uranium mining has strained its relationship with the government of Prime Minister Helle Thorning-Schmidt in Copenhagen. Danish lawmakers have criticized plans to import Chinese workers and capital, reigniting Greenland’s campaign to sever ties after 200 years of colonial rule.
Qujaukitsoq, the finance minister, said the country has taken measures to prevent an “invasion” of Chinese workers.
“I’m not worried about the Chinese or any other nation for that sake,” he said. “I’m sure that Greenland can take of itself in the future, but of course we have to be mindful of how we are conducting our business with other nations. Especially with mighty nations as China.”
Denmark has granted the island increased independence and will cut its 3.6 billion-krone annual subsidy as royalties from mining, oil and gas grow. The governments in Copenhagen and Nuuk agreed in 2009 to renegotiate terms for petroleum and mining revenue when Denmark no longer transfers money. The U.S. Geological Survey has estimated exploration areas could hold 50 billion barrels of oil and gas.
Still, investors in Greenland have yet to make any money. The government doesn’t expect to generate any oil revenue for at least a decade from drilling off the island’s east coast, Kirkegaard said.
Drilling off the more hospitable west coast was abandoned for more than three decades before Cairn Energy Plc returned in
2010. The Edinburgh-based explorer spent $1 billion and two years drilling wells without finding oil. Exploration off Greenland’s western shores could resume in 2015 or even this year, Kirkegaard said.
Of the 23 active oil and gas exploration licenses that Greenland has issued since 2002, not a single one has led to a profitable discovery.
Kirkegaard predicts the island’s potential as a supplier of raw materials will keep investors coming as populations grow and demand swells.
Companies will line up “simply because the world’s need for energy is growing,” he said.