Sustainable arctic oil & gas exploration and development.

• Author: Keithley, Bradford G.
• Position: OIL & GAS

Normally pieces that begin with this title are about the environmental aspects of oil and gas exploration and development in the Arctic. This piece isn't.

Instead, this piece is about the commercial aspects of oil and gas exploration and development in the Arctic and near-Arctic, and what economic characteristics make ongoing activity sustainable in some regions and not in others. From my perspective, there is a lesson for Alaska in the results.

Arctic Development

In 2009 the federal Energy Information Administration (EIA) published an analysis of "Arctic Oil and Natural Gas Potential." The analysis concluded, "[o]f the seventeen large Arctic fields located in North America, only three have been developed, all located in Alaska, around the Prudhoe Bay Field complex."

EIA found that the reason was simple. "Finding large Arctic oil and natural gas deposits is difficult and expensive; developing them as commercially profitable ventures is even more challenging."

The analysis found that oil and gas resources in other parts of the Arctic have been more fully developed. For example, as of the time of the analysis, forty-three of the froty-five large Arctic fields that had been discovered in Russia up to that point were in production. The analysis recognized that a commercial reason likely explained that result: "Russia's Arctic resources were predominantly developed under a Soviet command-and-control economy. Many of Russia's large producing Arctic fields might not have been commercially viable under market-based economics, when they were originally developed."

Nevertheless, the report concluded that the Russians had both discovered and developed more large Arctic fields than elsewhere in the Arctic.

Outside of Russia, there is another country also with a similarly impressive track record in finding and developing Arctic and near-Arctic oil and gas resources without using a command-and-control approach. That country is Norway.

While not discussed extensively in the 2009 EIA study because of a lack of activity prior to that time owing to a dispute involving its offshore Arctic boundary, coincident with the settlement of that dispute Norway has achieved a string of recent successes in Arctic and near-Arctic exploration.

In fact, in April of this year "The Barrel," a widely followed industry blog published by highly respected industry information source Platts, ran an article titled, "Norway: the new oil just keeps on coming."

That article focuses...