Greenland’s Energy Slowly Reveals Itself

Greenland’s Energy Slowly Reveals Itself

One of the most visible effects of global climate change in recent years, is the thawing of Arctic ice, which could have particularly disastrous consequences by raising global sea levels or even shift the entire Gulf Stream. Nevertheless, this thawing also presents exciting opportunities, especially for those interested in Greenland’s energy reserves.

According to official data gathered since 1958, Greenland experienced its hottest temperature in history at the end of last July, and new UN information shows that ice melt in Greenland is occurring up to twice as quickly as was previously predicted. All of this means that Greenland’s potential oil resources, estimated by some to be about 31 billion barrels, are more easily – and thus more cheaply – accessed than ever before.

Not surprisingly, this has attracted significant international interest, and Greenland has welcomed the attention heartily. This is mainly because increased oil exports is seen as a gateway for Greenland to declare independence from Denmark, which still holds sovereignty over the world’s largest island. At the moment, Denmark provides large grants and skilled labour without which Greenland is unable to cope. The revenue from energy sales could ultimately lead to self-sufficiency.

As a result, the Greenlandic government offered 19 license blocks for resource exploration in 2012, eleven of which went to giants such as ExxonMobil, BP, and Chevron, who were quick to send in applications. The remaining 8 blocks  – open to a wider array of companies – are scheduled to be distributed later this year.

However, a newly elected Social Democratic government in March put a halt to this process, citing the interest of Greenland’s 87,000 people and the environment. Various environmental groups such as Greenpeace supported the move, emphasizing the need for a strictly sustainable approach or even a total ban on any offshore drilling. This is because a crisis such as the 2010 BP spill would be even more catastrophic in Arctic waters due to lower temperatures, which inhibit organic decay, as well as an overall remoteness from sufficient infrastructure.

However, the existing licenses are still in play and expectations seem strong. For instance Cairn, which has spent $1.2bn on Greenland projects, will continue its operations next year despite its meek findings so far. Similarly, Norway’s Statoil and the British Tullow Oil exploration company are equally optimistic. Still, not all are as eager. France’s Total opted out of the region due to the high risk of ‘reputational damage’ in the case of rig malfunction.

Clearly, there are many elements that will play a part in the future of Greenland’s energy industry. Not only are Greenland’s and Denmark’s domestic politics important, but other members of the Arctic Council, the regional intergovernmental body, may also have strong opinions. International interest groups vary between energy lobbyists and environmentalists, and react to the success or failure of oil findings.

Even China is a significant factor: with its voracious appetite for energy and clear interests in using Arctic sea routes for trade, Greenland can serve as a vital source of fuel that is conveniently along the way .

In total, it seems that the global interests in favor of extracting and developing energy reserves from Greenland are overpowering, and are unlikely to be hindered for very long. However, the environmental debate has inevitably contributed to how it will all play out, and so an emphasis on safety and environmental sensitivity is probably going to become the norm.

In fact, this should be in the long-term interest of the oil companies themselves. Most of them are also looking to other, even more remote Arctic locations for future resource development, and indeed moving cautiously in Greenland now may make moving swiftly in the future much more easy. In any case, Greenland’s energy reserves show great promise, and the world would do well to follow the developments closely.

About Author

Karl Sorri

Karl has gained global experience working at the Transparency International Secretariat in Berlin, the Political/Economic Section of the U.S. Embassy in Helsinki, and as a freelance journalist. Karl holds an MA in Politics from the University of Glasgow and an MSc in International Relations from the London School of Economics.