The Arctic may not be all it's cracked up to be
Russia has started an aggressive campaign of militarizing its northern coast while the US is upping its intelligence game in the Arctic.
Even China has tried to get into increase its capabilities and presence in the region through the construction of icebreakers and the deployment of military vessels off the coast of Alaska for the first time last month.
At stake in the Arctic is an estimated 15% of the world's remaining oil, up to 30% of its natural gas deposits, and about 20% of its liquefied natural gas are stored in the Arctic seabed. Additionally, a global shipping route through the Arctic should the ice clear would be significantly faster than current routes through the Suez Canal.
However, the promises of ample resources and faster shipping lanes may prove to be nothing more than a pipe dream as the difficulties of operating in the Arctic come into focus and the cost of energy stays low. Oil prices have slid due, in large part, to a glut of oil on the world market.
"From an economic point of view, I'm not sure going offshore Arctic is very rational," Patrick Pouyanné, the chief executive and president of French oil company Total, told The New York Times.
Pouyanné's skepticism is largely due to the incredible technical difficulties that oil companies must tackle while operating in the Arctic. Even though the ice is melting, there is still an abundance of icebergs as well as incredibly powerful Arctic storms all of which could severely damage rigs and ships. Shoals have also not been adequately marked in the Arctic.
Additionally, the Arctic lacks the basic infrastructure needed for development. Roads, pipelines, and in some cases entire populations of staff and support staff will need to be placed in Arctic regions around potential oil sites, substantially raising the price of doing business in the region.
