Major oil companies from the US, UK, Norway, Sweden, and Russia are all set to drill in the Arctic, but a report from the UK Ministry of Defence (MoD) suggests they may be setting themselves up for failure.
Drilling in the Arctic is “economically prohibitive,” according to the report, which was commissioned by the Swedish Armed Forces and finalized in January 2016.
In other words: The companies seeking riches from Arctic’s vast untapped oil and gas wealth are going to be disappointed.
“…It is becoming increasingly likely that low oil prices, and reducing dependence on fossil fuels, will mean that extracting much of the oil in the Arctic will be economically prohibitive,” the report says. “The strategic importance of these resources may well have been overplayed.”
If this analysis is accurate, then the Arctic scramble is doomed to backfire on the oil industry.
The report’s authors conclude that by 2035, fossil fuel extraction will be largely unprofitable
According to another MoD report published by the DCDC in December 2015, over the next 20 years, oil majors will be driven to explore expensive resources in search of new profits as reserves become more scarce, but will face increasingly prohibitive costs in extracting those resources.
By 2035, the report says, the world may face a situation of dramatic “fossil fuel scarcity” due to rising demand and production costs.
Titled Future Operating Environment 2035, the report does not represent official government policy, but will “inform UK defence and security policy makers and our armed forces more broadly.”
The report acknowledges input from US, Australian, Swedish and New Zealand defense agencies, as well as UK government departments, major defense contractors like Boeing and BAE Systems, and oil giant Shell.
Demand for a range of natural resources is likely to increase over the next two decades, the report says.
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