The American Interest
Analysis by Walter Russell Mead & Staff
Iceland On Cusp of Oil Boom?

ICELAND-ECONOMY-TECHNOLOGY

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.]

Published on October 5, 2013 3:00 pm
  • Andrew Allison

    Reality check: “According to the official Canadian government website, the Northwest Passage has remained ice-bound and impassable all summer.” See also: http://nsidc.org/arcticseaicenews/

    • Kavanna

      Thanks for the reality check. The faith-based factoids that keep getting reported about “climate change” are breathtaking. This is the split personality many have acquired on the topic: what they believe versus what they know.

  • tarentius

    What an ill informed article. Iceland has given Norway license to drill two exploratory wells which won’t be drilled until 2018. Most of the oil near Iceland is most likely at sea, not land, and requires special expertise and equipment. The Norwegians and the US have it, the Chinese have absolutely none. The Chinese have been sniffing around Iceland for the last couple of years and their proposed investments in Icelandic land have been thwarted by the government. Iceland is very leery of the Chinese.
    The most recent survey of the oil reserves in the Artic was done by the US and it put the vast majority of the potential oil reserves well away from Iceland.

  • JoeKlip

    This is a definitely positive news as the consequence of Global Warming. Less sea ice means more available ice-free ocean for deep-sea petroleum production. This is like using lemon to make lemonade. Humans are such ingenious species

    • http://thevailspot.blogspot.com/ Rich Vail

      Joe, there is now more sea ice in the northern hemisphere than there has been in 20 years. All of the ground lost was made up this year. The northern arctic summer was only 45 days this year (rather than the normal 60). IPCC report recently released has admitted that cooling is occuring not warming…that the over the top rhetoric of the past 15 years is wrong.

      • Kavanna

        Yes, the Arctic warming of the 90s has halted and reversed in the last 10 years. The Arctic back to where it was in the early 90s. The Antarctic never warmed up, but has continued to cool and build up more sea ice.

  • http://www.facebook.com/people/Michael-Suba/668137376 Michael Suba

    This definitely positive news. Except the earth stopped warming 17 years ago. And shows every sign of continuing its cooling trend for another decade. Arctic ice has had a huge comeback this year. So unless there is some technology to by-pass this decline in temps this is still a “pipe” dream.

  • http://thevailspot.blogspot.com/ Rich Vail

    “as the world warms”

    except it ain’t. Even the IPCC has finally admitted that “global warming” isn’t happening, that in fact over the past 15 years, the planet has in fact cooled. Get at least some facts straight, please.

    • Kavanna

      Just read and compare the IPCC’s executive summary versus their scientific report. The contrast has always been there, but now, finally even the executive summary has to acknowledge what the scientific report already knew.

  • SeanR64

    You obviously didn’t get the memo. Or perhaps you subscribe to the leftists talking points. The earth ain’t warming. Even according to the IPCC. How you made such a boneheaded mistake is completely beyond me.