US DOE, Energy Information Admin. [Originally published January 20, 2012]
The Arctic holds an estimated 13% (90 billion barrels) of the world’s undiscovered conventional oil resources and 30% of its undiscovered conventional natural gas resources, according to an assessment conducted by the U.S. Geological Survey (USGS). Consideration of these resources as commercially viable is relatively recent despite the size of the Arctic’s resources due to the difficulty and cost in developing Arctic oil and natural gas deposits.
Studies on the economics of onshore oil and natural gas projects in Arctic Alaska estimate costs to develop reserves in the region can be 50-100% more than similar projects undertaken in Texas.
Profitable development of Arctic oil and natural gas deposits could be challenging due to the following factors:
- Equipment needs to be specially designed to withstand the frigid temperatures.
- On Arctic lands, poor soil conditions can require additional site preparation to prevent equipment and structures from sinking.
- Long supply lines and limited transportation access from the world’s manufacturing centers require equipment redundancy and a larger inventory of spare parts to ensure reliability, while increasing transportation costs.
- Employees expect higher wages and salaries to work in the isolated and inhospitable Arctic.
- Natural gas hydrates can pose operational problems for drilling wells in both onshore and offshore Arctic areas…