Iceland is sitting pretty for what will likely be the world’s next oil boom. The USGS estimates that the Arctic circle holds roughly 13 percent of the world’s undiscovered oil, and as the world warms, that ice is melting, uncovering billions of barrels of black gold. Countries are licking their lips at the possibility of tapping these reserves, and tiny Iceland is well-positioned to take advantage. The North Atlantic Current keeps the country’s harbors ice-free, making it an ideal jumping-off point for countries like China who are eager to invest in new oil plays. And, as the New York Times reports, Iceland is working towards developing some of this Arctic oil for itself:
It issued two licenses for oil exploration in January and is finalizing a third, hoping to pave the way for rigs to drill beneath its seas for the first time. Still, any drilling is probably years off, and will happen only if fresh studies confirm the signs that significant amounts of oil may be present under the sea floor. [...]
“There’s definitely something interesting there,” [Andy Brogan, oil and gas transactions leader at Ernst & Young] said. If the undersea rocks prove to be as rich in oil as those in Norway, “then there could be some quite big prospects there.”
“It’s one of those high risk, high return options,” he added.
Admittedly we’re still too early on in the process to know how this will pan out. Analysts predict that Iceland is still three years away from drilling the exploratory wells that will make or break these projects, and at least a decade away from commercial production. But for a country still clawing its way out of the 2008 financial crisis, there’s real reason to be optimistic about the future.
And even if the specific plays Iceland has a claim on don’t work out, Iceland can support what will surely be a thriving service industry to other Arctic drillers. As the NYT points out, China is particularly interested in cultivating a friendly relationship with the Nordic country for just this reason.
The energy landscape is already radically different from what is was even 10 years ago thanks to the shale boom and the rise of LNG. We’re far from the first to say it, but it bears repeating: Arctic hydrocarbons promise to be the next big shakeup. At the macro level, the world’s energy outlook is changing faster than it ever has, largely due to the rapid acceleration of technological innovation. Fortunately, the majority of these changes are for the better, confounding Malthusians and buying scientists more time to further develop renewable technologies.
[This photo taken on April 24, 2013 shows Reykjanes power station. Photo courtesy of Getty Images.]