Editorial: Hold On, Did The Cold War Just Get Arctic?

ARMS RACE: "The participation of two or more nation-states in apparently competitive or interactive increases in quantity or quality of war material and/or persons under arms."

Last Friday, as almost two billion people around the globe were marking the most solemn and significant date in the Christian calendar, something momentous was also happening in the frozen wastes of the Pechora Sea.

April 18^th 2014 saw the first shipment of 480,000 barrels from Gazprom’s Prirazlomnoye field in the frosty waters of Russia’s northwest. The development, which encompassed the drilling of 36 slant wells from the state-of-the-art ice-resistant oil-producing Prirazlomnaya platform is set to yield 45.2 million BOE per annum.

Regarded as the final frontier of oil and gas exploration, the success of the Prirazlomnoye development has opened up the northernmost part of the Earth for hydrocarbon exploitation. As such, it was hailed by Russian President Putin as: "The beginning of great and large-scale extraction of minerals and oil by our country in the Arctic."

The Arctic has an estimated 90 billion barrels of undiscovered and technically recoverable oil plus 47.3 trillion cubic metres of technically recoverable natural gas and 44 billion barrels of natural gas liquids in 25 geologically defined areas across five territorial claims. The Arctic holds as much as one third of the world’s remaining undiscovered hydrocarbons, nearly 84 per cent of which are situated in inhospitable offshore locales.

While the prize may be lucrative for the five states that divide the Arctic between them, high costs, severe weather conditions and a lack of infrastructure all stand in the way of the successful commercialisation of the region. And that is discounting the controversy fomented by pressure groups around the spectre of environmental calamity in a fragile ecosystem.

The timing of this first cargo of Arctic oil could not have come at a more politically-sensitive juncture. A fortnight ago and with the Crimean situation in mind, US Secretary of State, Hillary Clinton, warned against creeping Russian expansionism and the possible militarisation of the Arctic circle.

With relations icier than at any time since the raising of the Iron Curtain, could the headlong rush to Arctic oil be the Cold War 2.0 equivalent of the Soviet era arms race?

Tim Haðdar is the Editor In Chief at Oil & Gas IQ. Reach Him At Twitter Or OGIQ

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