Hydrocarbon Strategy 2009

There is broad political consensus in Greenland to work towards developing the mineral resources sector into a sustainable industry which will make positive contributions to economic development and create new jobs. The objectives are an important part of the long-term economic policy to support development of alternative business sectors to fisheries, partly with the goal to reduce the large current dependence on the annual block grant from Denmark.
 

Development of the hydrocarbon sector should take place in a manner which provides the greatest possi- ble benefits for the society in Greenland. The society must be secured a reasonable share of the surplus from exploitation, and local insight and knowledge about activities should be developed in order to, for example, ensure that local labour and local businesses are used as much as possible.
 

A clear political requirement for all oil and gas activi- ties is that these are carried out safely and with due consideration for the environment. The Arctic environ- ment is vulnerable, and the Greenland commercial basis and culture is very much linked to nature and the environment.
 

Therefore, hydrocarbon activities should be promoted aiming at increasing employment and earnings. One requirement for making commercially viable discove- ries which can support local employment and increase earnings is that exploration activities are maintained at a sufficiently high level.
 

As a result of the high costs of exploration in Greenland, it is important that the oil industry is res- ponsible for a large part of the overall exploration activities. Therefore, an important strategic goal is to encourage interest from the industry in investing in oil exploration in Greenland. In this regard it is important that the authorities publish clear objectives and tar- gets for how, when and on what terms they intend to offer exploration and exploitation licences in Greenland.
 

There is fierce competition between a number of countries throughout the world to attract the atten- tion of the oil companies. Because of this it is very important to provide, as a minimum: a) geological data and surveys substantiating the potential for commercially viable deposits of hydrocarbons in the subsurfa- ce, b) competitive licence terms, c) stable framework conditions, and d) efficient processing by the authorities.
 

This proposed strategy for future oil and gas explora- tion in Greenland addresses the need for long-term retention of the industry interests which have been successfully established within recent years.
 

Over recent years, Greenland has seen unprecedented international interest in the mineral resources poten- tial of its subsurface. The result of the oil licensing round in the areas offshore Disko-Nuussauq could be decisive for Greenland’s future. Some of the world’s largest oil companies have been granted exploration and exploration licences in Greenland waters. Companies such as ExxonMobil, Chevron, Husky Energy, Cairn Energy, EnCana, DONG Energy and PA Resources are planning to invest billions in the devel- opment of Greenland's oil potential in the coming years.
 

So far the international financial/economic crisis has not caused the oil companies to lose their long-term interest in Greenland’s oil potential. On the contrary, the KANUMAS companies (Exxon, Statoil, BP, Japan National Oil Corporation (now JOGMEC), Texaco, Shell, NUNAOIL) for example, have shown considerable interest in realising their preferential position for the areas offshore north-east and north-west Greenland. These are long-term investments, which means the companies do not expect to commence proper produc- tion within the near future. Similarly, these invest- ment strategies do not fluctuate in the short run, e.g. with the current spot prices for oil and gas, but aim to ensure the oil companies’ a long-term basis for reserves.
 

Oilexploration activities are characterised by conside- rable investments and, not least, considerable explo- ration risks. Ensuring a high level of exploration activity at all times in several different regions of Greenland is therefore central to the Hydrocarbon Strategy, which was introduced in 2003 and continued in the 2005 “Strategy on Social Aspects of Exploration and Exploitation of Oil and Gas in Greenland”.
 

This is because the degree of success of exploration activities in the different regions of Greenland will probably vary. It is not possible to predict which region will first yield the desired breakthrough in oil activities. In other words, it is to be expected that not all of the current licence areas (south Greenland, cen- tral west Greenland, the Disko-Nuussuaq region) will yield commercial discoveries of hydrocarbons.

Following the successful licensing round for the Disko-Nuussuaq region offshore west Greenland, comprehensive development activities have been carried out over the last few years in Greenland’s north- western and north-eastern offshore areas, i.e. Baffin Bay offshore north-west Greenland and the Greenland Sea offshore north-east Greenland. In the oil sector these areas are also referred to as: The KANUMAS areas.

Activities include:

• A comprehensive strategic environmental impact assessment of the areas offshore north-west and north-east Greenland carried out in collaboration between the Bureau of Minerals and Petroleum, the National Environmental Research Institute and the Greenland Institute of Natural Resources.
• A comprehensive analysis and assessment of all geo data from the Baffin Bay region carried out in colla- boration between the Bureau of Minerals and Petroleum and GEUS (The Geological Survey of Denmark and Greenland).
• Comprehensive surveys of the changes in the region’s ice conditions carried out in collaboration between the Bureau of Minerals and Petroleum, the Danish Meteorological Institute and Technical University of Denmark.
• An assessment of competitive models of taxation and fees in the oil sector in Greenland compared with a number of other countries, carried out with the internationally recognised consultant company IHS Energy.
• An updated assessment of the oil and gas potential in the sea offshore north-west and north-east Greenland carried out by the U.S. Geological Survey, USGS.

This has led to considerable long-term interest in carrying out exploration activities in these areas from the oil industry and the seismic industry. International oil companies and seismic companies have therefore car- ried out comprehensive data collection and prospecting in the KANUMAS areas in recent years.
 

Furthermore, the Bureau of Minerals and Petroleum has been in dialogue with the KANUMAS companies (some of the world’s leading oil companies) on how to realise the preferential position that these companies hold with regard to participating in the first oil licensing round in these areas.
 

This strategy paper therefore focuses primarily on expansion of the licence policy to cover the northern areas of Greenland waters. However, this strategy also contains an assessment of the development of the areas offshore south-west Greenland (the Labrador Sea) and central west Greenland (the offsho- re areas between 63°N and 67°N), as well as other areas.

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