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Pole Position

Up Here Business 2007

Northern nations like Canada are scurrying to stake their claims to sovereignty of the Arctic. Vast riches are at stake.

“My guess is we’ll see a complete division of the Arctic Ocean – except for two very clear depressions that are not part of a continental shelf. Everyone would have a sector, like the Mediterranean or the North Sea.”
--Rob Huebert, University of Calgary professor and Arctic sovereignty specialist

“On Melville Island on the Sabine Peninsula there are two gas fields that contain from eight to 12 trillion cubic feet of gas. When these areas were drilled, out of only 75 wildcat wells they hit 19 oil and gas fields. That’s an amazing batting average. It’s the best ever, anywhere on the planet.”
--Benoit Beauchamp, executive director, Arctic Institute of Canada

One hundred years ago Senator Pascal Poirier stood in the upper chamber of Parliament and proclaimed that the whole Arctic Archipelago between 60 and 142 degrees west longitude clear to the North Pole belonged to the Dominion of Canada. His articulation of that claim is still enshrined on a plaque placed on Melville Island two years later by captain J.E. Bernier of the C.S. Arctic.
Fast forward to August 2007. Spurred by the requirements of a 1982 international agreement called the United Nations Convention on the Law of the Sea, a Russian submarine plants a titanium flag on the sea floor precisely under the North Pole. Russia says it has geological evidence that the North Pole is an extension of its own continental shelf and under UNCLOS rules can claim resources between the Pole and its own Northern shores.

The Arctic is heating up in more ways than just global warming. Five circumpolar countries with Arctic Ocean frontage – Russia, Canada, United States, Denmark and Norway – know that sometime in the decades ahead Arctic oil and gas resources will become easier to exploit. The prize could be enormous. The U.S. Geological Survey estimates that the region harbours 25 per cent of the world’s undiscovered oil and gas reserves.

And so the race is now on among these Northern nations to claim a further piece of the Arctic, which is why Rob Huebert says the Russian flag incident was no stunt? “A lot of people have tended to try and downplay it but it is very significant,” says the political science professor from the University of Calgary and a specialist in Arctic sovereignty. “Russia is saying, “we’re back and we’re going to be as aggressive and as assertive about our Arctic as possible.” And petrodollars now allow them to be back.” He says they want to show they’re not American lackeys – there’s a certain yearning for the good old days.

While the Russians have said their claims will only be settled under the provisions of UNCLOS, planting the Russian flag got the world’s attention that “they are serious about the Arctic,” Huebert says. UNCLOS’s Article 76 stipulates that if any country wishes to claim an extension of its continental shelf it must present convincing geological evidence of its continuation past the internationally recognized 200-nautical-mile limit. It’s critical that any underwater structures to make the case have to be a geophysical extension and not a stand-alone structure. Claims must be submitted within 10 years of a country’s ratification of the convention. Russia ratified in 1997, so this year it must have its case submitted. Russia’s first claim, in 2001, was rejected for lack of data. This time it says it has got convincing geological proof.

But it’s just the first step. The five circumpolar countries will each have their own claims on the Arctic. UNCLOS doesn’t settle disputes; “it provides you with a full series of dispute mechanisms – special boards and mediation – and you and your neighbours decide which you’re going to use,” Huebert says. “The only criteria is you have to do it in a peaceful manner.” But he says there are a couple of flies in the ointment. “The U.S. hasn’t ratified it yet and do you think Russia is willing to wait until 10 years after that?”

We don’t know; no one has ever done this before. But the Americans haven’t been idle. In late September the U.S. Coast Guard icebreaker Healy returned from its fifth season scanning the Arctic seabed.

Other circumpolar countries have been making moves too, with later ratification dates: Canada’s is to be complete by 2013, the Danes by 2014. Norway made its claim last year. Under Article 76, three countries – Russia, Canada and Denmark – may be claiming an underwater mountain called the Lomonosov Ridge that stretches 1,100 kilometres from northern Greenland and Ellesmere Island, underneath the North Pole clear to Russia’s shelf.

Amongst the three, Russia has so far been the most forward. “What they’re doing is they’re trying to establish a picture in everyone’s mind that everything stops at the Pole,” Huebert says. “There’s no reason whatsoever that the Pole should be some magical location where everything stops and goes. If it was the Mediterranean people would be talking equal distribution – take a measurement from my coast and their coast and then we draw it in the middle.”

But Huebert says Russia’s claim to the North Pole would give them an advantage. “The North Pole is not the geographical centre between Russia, Alaska, Greenland and Canada; it’s in fact further in towards the Russian coast. So claiming it would give them an advantage.” Still, Huebert says the Russians won’t be able to claim the entire region to exploit as it sees fit. “My guess is we’ll see a complete division of the Arctic Ocean – except for two very clear depressions that are not part of a continental shelf,” Huebert says. “Everyone would have a sector, like the Mediterranean or the North Sea.”

However, some of the anticipated spoils of such a division may not be as exciting as once thought. A joint study in late 2006 by Wood Mackenzie and Fugro Robertson found that in addition to the 233 billion barrels of oil equivalent already discovered in Arctic basins, there is potential of 166 billion more. Of these, the report said, 74 per cent is less-attractive gas potential. Moreover, the study showed only approximately one quarter of the oil volumes previously assessed in key North American and Greenland basins.

While the report didn’t examine areas of potential dispute like the Lomonosov Ridge, it is an indicator of the entire area’s oil and gas potential. “It’s basically an analysis using all available data working from the bottom up using maps of potential hydrocarbon accumulations,” says David Parkinson, Wood Mackenzie’s upstream consultant on the report’s study team.

Another key conclusion from the study is that distributing the Arctic’s resources will be a challenge. Many of the required technologies are still in their infancy and peak production is not expected for at least 20 years. “Exporting will be a significant issue because the infrastructure needs to be built,” Parkinson says. He says it’s exacerbated by the high percentage of gas associated with those yet-to-be-found reserves, at least until prices are high enough to justify infrastructure investments. The report also said that “high costs elevate average development breakeven prices across the Arctic to above $30 (U.S.) per barrel of oil equivalent. [But] some large oil fields offer development breakeven prices below $20 (U.S.) per barrel.”

But the study doesn’t contain all bad news, particularly for Canada. The country’s hydrocarbon potential looks good – the Beaufort and Franklinian-Sverdrup basins promise five to 10 billion boe of yet-to-find oil and gas reserves. Then there are the Southern Arctic Islands, Baffin Bay and the Labrador Shelf with maybe another half a billion boe. In fact, a 2000 estimate by the Department of Indian and Northern Affairs found Canada’s Northern basins contain approximately 48 per cent of the country’s undiscovered conventional light crude oil potential and 46 per cent of its undiscovered conventional gas potential.

At the offices of the Arctic Institute of North America, the institute’s executive director, Benoît Beauchamp, is excited about Canada’s potential there. But how much is really known? Beauchamp says there is exploration data that helps tell that story. “Up to the Arctic islands,” he says. “About 160 wells were drilled in the Arctic Islands offshore. The farthest north well would be on Ellesmere Island, just north of Eureka, thousands of kilometres from the Beaufort.” But how about north of Ellesmere, where it may connect with the Lomonosov Ridge, does it all peter out?

“Au contraire,” says the affable French Canadian, who spent 18 years with the Geological Survey of Canada in the Arctic Islands, mainly studying the Sverdrup Basin, before joining the Arctic Institute two years ago. But he admits there is a lot to be explored yet. “This whole area here is the continental shelf and geologically we know less about this entity than we know about Mars or Venus,” he says, running his finger along the northwestern edge of the triangle of Nunavut’s Ellesmere and Sverdrup Island groups on the map, about 4,200 kilometres due north of Ottawa.
Beauchamp says the reason so little is known is because the pack ice gets forced up against the shore. “It’s incredibly thick here. You’d need a Class 8 nuclear icebreaker to be able to plow through it. But that being said, the continental shelf is that wedge of sediment that goes from zero here, thickens to a few kilometres and then zero again in the offshore area.”

There have been attempts to map it. Beauchamp describes a mid-1980s experiment conducted on an ice island. “It started around here,” Beauchamp says, pointing to Cape Discovery. “The Polar Continental Shelf Project put a camp on it to acquire images of the sea floor and what’s underneath. It gave us an indication of how thick that wedge of sediment is.” The idea was to drift all the way down to the Prince Patrick Island area acquiring continental shelf data along the way. “But it drifted down south and decided to turn inland and got stuck in here,” he says, pointing to Ellef Ringnes Island, “and broke into a million pieces.”

The data helped, but to claim extra mileage under the UNCLOS formula you need to demonstrate that wedge of sediment extends to a certain proportion of the total. “The only way you can do that is with a proper image of that wedge, especially as it peters out,” Beauchamp says.

The geological models of the origins of the Arctic Ocean show a rift – an opening in the earth’s crust - where sediments and organic matter are usually found. “It actually opened in a counter-clockwise rotation, with Alaska at one point against Banks Island,” explains Beauchamp. “As it opened it created a depression there exactly like the rich Norwegian shelf where the North Atlantic opened. You have a big shelf all broken by faults, so it could be identical here.” Or even similar to the Prudhoe shelf, he adds.

Beauchamp is excited about the Sverdrup Basin. “It’s where we have 25 per cent of the known gas reserves in Canada,” he says. “On Melville Island on the Sabine Peninsula there are two gas fields that contain from eight to 12 trillion cubic feet of gas. When these areas were drilled, out of only 75 wildcat wells they hit 19 oil and gas fields. That’s an amazing batting average. It’s the best ever, anywhere on the planet.”

Beauchamp compares Canada with Norway, but awards us a distinct plus. “Norway is a wealthy country because of all the oil and gas resources that lie in its continental shelf,” he says. “Well, in Canada we have in addition a second one, a piece of Baffin Island and Labrador as well.” He says this one is quite unexplored in terms of its oil and gas potential. “But there’s no question it’s very prone. You have rivers feeding, you have source rock developing, you have everything that is required for a petroleum system.”

One detailed study has been completed but hasn’t yet been released. Started in 2000 by GSC and completed three years later it produced a number of maps and an 800-page report. Pointing to the northern end of Baffin Bay, Beauchamp says the study team demonstrated there is actually a delta there that was fed by rivers, not unlike the Mackenzie Delta. “There are all kinds of structures with sediments here,” Beauchamp says.

It’s not all about oil and gas either. There are gas hydrates. “In the Arctic Islands and under the permafrost there are gas hydrates. Also on the continental shelf here,” Beauchamp says. “And in the deeper water where the wedge starts to dip and in the shallower waters where the area has subsided from the reaction of the isostatic rebound to the east.”
And open Arctic Ocean areas away from the undersea ridges - what do we know about these? “I think there’s not much potential there,” Beauchamp says. “It’s like the middle of the Atlantic Ocean – basalts, volcanic rocks with a veneer of sediment – it isn’t where you’re going to find oil and gas.”

In the meantime, exploration in Canada’s Arctic continues. Following ratification of UNCLOS in 2003, $69-million in federal funding was provided to establish the outer limits of our Arctic and Atlantic continental shelves. GSC has been conducting seabed survey and mapping in both areas, often partnering with other circumpolar nations.

“These are Canadian operations and where possible we are partnering with Denmark in the eastern Arctic, the U.S. in the western Arctic and we may have additional discussions with Russia,” says Jacob Verhoef, director of GSC-Atlantic. He says the team is collecting single-beam bathymetry as well as single-channel seismic mainly to define the foot of the slope for Article 76 purposes. “In addition, we are using refraction experiments to establish the nature of the submarine ridges.” 2007 was the first year of a major icebreaker survey and last year the team did on-ice refraction experiments on the Lomonosov Ridge.

It’s far from over yet. “The survey plan is for the next four to five field seasons,” Verhoef says. Then the data will be assembled for the UNCLOS proposal; following that could come decades of negotiation. It’s hardly likely to be another 100 years before a new proclamation in Parliament. But it may well happen soon enough to take advantage of the predicted reduction in ice cover that will open Canada’s potential new sector of the Arctic Ocean to oil and gas companies eager to replenish their depleting reserves.

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