This paper consists of a report made by the Eurasia Group for the Wilson Center. It served as a basis review for the “In Search of Arctic Energy” publication launch organized by the Canada Institute (Wilson Center) in January 2014. It portrays the main characteristics of the Arctic hydrocarbon exploration and extraction activities in the five Arctic states that are currently active in the region: Canada, U.S., Greenland, Norway and Russia. Although the report focuses more extensively on the North American Arctic, it outlines the main developments achieved by Norway and Russia and gives recommendations based on the best practices and the most efficient regulation frameworks. These are the main conclusions drawn by the report:

The development of Arctic hydrocarbons has attracted the attention of policy makers in the recent years as conventional resources of oil and gas are depleting around the globe. Improvements in technology and climate changes have stimulated the interest to explore the potential of hydrocarbon resources in the circumpolar region. It is estimated that the Arctic contains 13% and 30% of the world’s undiscovered reserves of oil and gas respectively with 85% of them being located offshore. The interest for Arctic resources is expected to grow in the near future, posing serious concerns for the protection of its unique ecosystem. At the same time, it is an opportunity for Arctic states to increase cooperation and establish channels for sharing technologies and information on responsible practices and efficient regulation frameworks. Although some progresses have been made to increase cooperation at the pan-Arctic level, notably with the consolidation of the Arctic Council in 1996 and the conclusion of two legally binding agreements under its auspice in 2011 and 2013, prospects for future collaboration remain mitigated by the unequal level of development of Arctic hydrocarbon between the countries, the huge gaps in their national regulation frameworks and the reluctance of some states to negotiate at the international level. While major steps have been made in the development of Arctic oil and gas in Russia and Norway, the North American countries have yet made little achievements and it is unlikely that their Arctic supplies will become abundantly available in the 2025-2050 timeframe. This can be explained by a variety of economic, geological, social and political factors that make exploration and extraction very costly and not economically viable for international oil companies (IOCs). A more flexible regulation framework, including longer lease terms for IOCs, and public-private partnerships should be established to encourage future production in NA Arctic. The experience of Russia and Norway gives some examples of effective policies in the Arctic oil and gas. Both countries have introduced tax incentives measures to stimulate exploration and production in Arctic waters and in 2011 they signed a mutual maritime border agreement for the development of Barents Sea. Companies in Russia are also active in developing joint ventures with IOCs and national oil companies (NOCs) from other countries. For instance, an agreement between Rosneft and Statoil signed in May 2012 permits Russia to leverage Statoil vast offshore experience and its good safety record. The case of Russia and Norway outlines the benefits provided by bilateral agreements, which can be an efficient alternative to negotiations under the auspice of the Arctic Council.

"Opportunities and Challenges for Arctic Oil and Gas Development", Eurasia Group report for the Wilson Center, Washington, D.C., 2014, available at:  https://www.wilsoncenter.org/sites/default/files/Artic%20Report_F2.pdf