Unlocked by melting ice-caps, the great polar oil rush has begun

Trillions are at stake, and the ecological risks are equally huge. Michael McCarthy reports

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It's the melting of the Arctic ice, as the climate warms, that makes it possible — and you can understand why they're all piling in. In July 2008, the US Geological Survey released the first ever publicly available estimate of the oil locked in the earth north of the Arctic Circle.

Scramble for hydrocarbons above the Arctic Circle: click here to download graphic (900k)

It was 90 billion barrels, representing an estimated 13 per cent of the world's undiscovered oil resources. If you're an oil company, or an oil-hungry economy, that's more than enough to make your mouth water.

But wait. Less than a year later, the geologists involved in the programme, known as Cara, the Circum-Arctic Resource Appraisal, had radically revised their estimate – upwards. Now – in June 2009 – they said the Arctic might in fact hold as much as 160 billion barrels, which would amount to more than 35 years of US oil imports, or five years of total global oil consumption, and be worth, at current prices, more than 18 trillion dollars. Forget mouthwatering. Think drooling.

In the historic opening-up to exploitation of the frozen north, hydrocarbons are the greatest prize (there is likely to be even more natural gas than there is oil.)

No matter that the polar regions are the most inhospitable parts of the whole globe. And no matter, either, that the Arctic constitutes the world's most untouched ecosystem. The oil industry's motto has always been "Can Do", and in the Arctic, it's already doing.

Cairn Energy, an Edinburgh oil exploration company founded by the former Scotland rugby player Sir Bill Gammell, was the first in: it is now in the process of drilling four test wells in Baffin Bay, off the west coast of Greenland (it began last year with three wells, none of which struck oil).

Next year Cairn will be followed into the high north by Shell: the Anglo-Dutch giant has already spent more than $2bn (£1.24bn) on seabed leases and hopes to start a massive programme of oil exploration in July 2012, with up to ten wells in the Beaufort and Chukchi seas off the north coast of Alaska, a region that, according to US Geological Survey estimates, holds 25bn barrels of oil. Shell will be followed in turn by the biggest of all the oil "supermajors", and the world's largest company – ExxonMobil.

Last week it was announced that Exxon had formed an Arctic exploration partnership worth $3.2bn with Rosneft, the Russian state oil group, to look for oil on the other side of the Arctic, in the Kara Sea off the coast of Siberia. In doing so, Exxon was taking the place of BP, which had done essentially the same deal with Rosneft in January, only to see it fall apart in May when it was blocked by BP's existing Russian partners. BP will be back, though; it was "actively looking for opportunities" in the Arctic, a spokesman said last week.

Yet this great surge of development is producing a great surge of concern, as environmentalists contemplate the possibility of a repeat of BP's catastrophic Deepwater Horizon spill in the Gulf of Mexico last year – in the even more unforgiving conditions of the frozen north.

What especially angers green groups is the very fact that the melting of the Arctic ice through global warming is what is paving the way for the region to be exploited.

In mid-September 2007, Arctic Ocean ice cover dropped to a record low, at half its average extent over the years 1979-2000, and it is approaching a similar low this month.

Ben Ayliffe, an Arctic campaigner for Greenpeace, one of a number of environmental bodies strongly opposed to Arctic oil, said: "We've seen how our actions are changing the world, and the idea that we're going to go and use the retreating sea ice as a business opportunity is frankly madness. The risks of drilling and producing oil in this fragile and pristine natural ecosystem, one of the last great wilderness areas of the planet, are terrible."

Greenpeace has taken the lead in opposing the new oil rush with its traditional non-violent direct action: this summer it sent two ships, the Esperanza and the Arctic Sunrise, to disrupt Cairn Energy's drilling operations in Baffin Bay, and its activists did so briefly, until they were arrested and Cairn secured an injunction against the group.

In addition, Greenpeace has persuaded Greenland's government to publish Cairn's 200-page oil spill response plan, which the group subjected to a fierce critique last week, based on an analysis by Professor Rick Steiner, a marine biologist at the University of Alaska.

In a list of criticisms, the analysis pointed out that the plan itself admitted that oil clean-up operations after a spill would not be possible during an Arctic winter, and alleged that a "worst case" spill from a Cairn well would be very much worse than the company was allowing.

A spokeswoman for Cairn said at the weekend: "This plan has been reviewed and approved by third parties including Oil Spill Response Ltd, the Danish National Environmental Research Institute and the Greenland government. All are satisfied that the plan is robust and appropriately designed to deal with an incident in this area."

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