Last time, we did a festive piece on the oil well equipment known as the ‘Christmas Tree’. Whilst Christmas might have now passed, we thought we’d stick to the wintery topic. Lets ask the the question: is there any oil in the North Pole? There’s got to be a reason, after all, that that jolly fellow in the red suit sticks around there for?
Joking aside, petroleum exploration in the Arctic has been carried out for over half a century now. With that, several major geological basins having been explored. Indeed, according to research carried out by the US Geological Survey (USGS) back in 2008, over 20% recoverable oil and gas resources were thought to be located within the Arctic Circle. The team here at TriStone Holdings Ltd, whose interests as an oil investment firm centre around the more hospitable landscape of the USA, wanted to take a look at some of the history behind Arctic drilling, as well as some of the difficulties.
The first Arctic oil discoveries were made by the Russians (then the Soviet Union) back in 1962. They uncovered the Tazovskoye Field, located roughly 500km north-east of the incredibly remote town, Salekhard. At this time, thanks to the geopolitical tensions induced by the Cold War, competition from the USA wasn’t far away. Later on, in 1969, the US made their first Arctic oil discovery, in Prudhoe Bay in Alaska.
The Arctic has become increasingly attractive for its resource potential. In recent times several countries are staking their claim on what lies below. Besides the industry giants of USA and Russia, Denmark, Norway and Canada have also shown great enthusiasm for the region. China has been making some of the biggest Arctic discoveries. Last year, a Chinese drilling rig unearthed almost 400 billion cubic metres of gas on the Russian Arctic shelf.
The Difficulties Of Arctic Drilling
One of the most obvious difficulties encountered by petroleum exploration in the Arctic is unquestionably the conditions. This is drilling at the very extremes of what nature has to offer. As an oil investment firm, we think this is unsurprising, as it can make things difficult for producers. In fact, those harsh conditions typically mean that production in Arctic regions is much higher than that of other, more accessible petroleum-producing areas.
Looking at Arctic Alaska, for instance, onshore O&G projects can cost up to a staggering one hundred percent more than a comparable project in Texas, say. That means you’ve got to be sure of massive production potential, going into this area, to know it will be worth your while. It’s not just production costs, either, there are very real operational dangers when working in such difficult conditions. Should a drilling vessel run into difficulty, for instance, it’s much trickier to then get them out of it. Also, with as much ice around as there is (it is, after all, pretty cold up there…) drilling vessels are also at an elevated risk of running aground – that then brings into play the risk of oil spills, which is disastrous.
Oil Or Gas – Which Is More Prevalent In The Arctic Circle?
Though both resources are present, it’s thought that natural gas makes up the majority of remaining reserves within the Arctic Circle. Currently, it is accounting for around 75% of remaining reserves, with crude oil thought to account for the remaining 25%.
Where Else Has Large Recoverable Reserves?
Given the difficulties listed above, though there might be significant potential within the Arctic circle, in the long-term it probably isn’t viable. Where else, then, are the other global areas with large amounts of recoverable oil and gas? The obvious example is the Permian Basin, in the USA, which is what most people think of when they think of ‘drilling for oil’.
The Middle Eastern nations also house large proven reserves, Saudi Arabia, in particular, but also Kuwait, the UAE and Iran. The country with the largest proven reserves, however, is one that might surprise you – it’s Venezuela. The country, located on the northern coast of South America, had over 302 billion barrels of oils. As of 2018, and has an economy propped up, unsurprisingly, on that oil economy.
We’ll stick to the conventional oil fields, we think – though there’s no doubting the ingenuity shown by producers in managing to unlock the potential at these Arctic regions! So, if you’d like to find out more about our work as a UK oil investment firm, then get in touch! Contact TriStone Holdings Ltd today on 0800 055 7079 or by emailing us at [email protected]