The US can no longer consider the Arctic as a long-term strategic energy supply source, according to a new joint study by Wood Mackenzie and Fugro Robertson, “Future of the Arctic.” The study found the Arctic potential is significantly less than previous estimates had suggested, and the mix of resources have been found to contain much less oil and more gas. “These findings are disappointing from a world oil resource base perspective,” said lead study author Andrew Latham, vice president, Energy Consulting at Wood Mackenzie.

The study shows only approximately one-quarter of the oil volumes previously assessed in key North American and Greenland basins. Most importantly, the study reveals the Arctic to be a gas province, with 85% of the discovered resource and 74% of the exploration potential as gas. “This oil:gas mix is not ideal because remote gas is often much harder to transport to markets,” explained Latham. “In addition, export and technology constraints are expected to delay production of a large portion of the commercial gas until 2050.” Wood Mackenzie and Fugro Robertson assessed the Arctic resource potential using detailed geoscience analysis of individual basins and their various petroleum reservoirs, ground-truthed by industry data on exploration wells and existing discoveries.

Under the most likely scenario, it is projected that production from the Arctic will contribute some 3 MMboe/d liquids and 5 MMboe/d gas at peak, with the proportion of production from US basins lower than previously anticipated. “This assessment basically calls into question the long-considered view that the Arctic represents one of the last great oil and gas frontiers and a strategic energy supply cache for the US,” stated Latham. The findings also indicate the US must look elsewhere to meet rising demand – namely to OPEC nations such as Venezuela, and to Russia. Although these supply options are not expected to face long-term technical challenges, they do carry broader geopolitical concerns relating to security of supply.

“While these results are disappointing to the US as a whole, the Arctic still holds great potential for individual oil and gas companies with the advanced technology, money and time to develop the challenging resources and build the infrastructure required to transport them,” explained Latham. Additionally challenging is the Arctic’s resource distribution, which is not expected to alleviate current supply issues. With many of the required technologies still in their infancy, peak Arctic production is not expected for at least 20 years. This means that in the short term, Arctic resources are unlikely to compete favorably with lower cost sources such as the Middle East.

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