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Oil & Minerals

Iceland wants in on oil hunt

Climate change opens up new possibilities in the Arctic, and Icelanders say they don’t want to stand on the side lines while their neighbours reap the benefits
Oil & Minerals
Iceland is hoping to join the club of Arctic oil states (File photo: Colourbox)

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Iceland is opening up its seas to oil exploration. The island nation issued two licenses for oil exploration in January and is working on granting a third. If any of those companies begin exploration, it would be the first time a drilling rig has ever appeared off Iceland’s coast.

Geological similarities to Norway’s oil-rich seas have Icelanders hoping that their waters will prove to be just as bountiful. One report showed that studies of seabed samples had found residues indicating that Icelandic waters may indeed be covering reserves as large as those that Norway has found in the Barents Sea, northeast of Iceland.

The US Geological Survey estimated in 2008 that the Arctic contained 90 billion barrels of potentially recoverable oil, some 13 percent of the globe’s untapped reserves.

China calling
Iceland is pinning its hopes on an area about 200 kilometres north of its coast. The Dreki region is the subject of a 1981 agreement with Norway, giving each country the option to take a 25 percent share of any drilling license its neighbour issues in the region.

Improvements in technology and climate change have made oil exploration feasible in places like Dreki, where it would have been impossible just a few years ago.

The possibility of oil coupled with a new summertime shipping route that would cut thousands of miles off the journey between Asia and Europe has China courting Iceland in a big way. Beijing inked a free-trade deal with Reykjavik in April, its first with a European country.

Hopes and fears, but nothing concrete yet
Many in Iceland are banking on the jobs generated by the oil and shipping industries to help them recover from the economic crisis which nearly destroyed the country’s entire economy.

Environmental groups like Greenpeace are dead set against Arctic oil exploration, fearing that mining and drilling would irreparably damage one of the world’s most fragile regions.

SEE RELATED: Tilting at drilling rigs

Meanwhile, some industry analysts have expressed doubts that drilling in the Arctic would be cost-effective. They pointed to the expense of working in such remote areas and to the recent jump in shale oil production, which could keep oil prices so low that the infrastructure investments required to acquire Arctic oil would make it impossible to turn a profit.

Any drilling in Iceland is at least ten years away and would only begin if the promising signs are actually harbingers of a large find.