According to the United States Geological Survey, the area above the Arctic Circle holds approximately 90 billion barrels of undiscovered, technically recoverable oil and an estimated 1,670 trillion cubic feet (Tcf) of technically recoverable natural gas.
Nevertheless, due to it being relatively inaccessible, Arctic oil commands the highest breakeven prices, typically ranging between US$70 and $120 per barrel. In light of the current low oil price environment, Arctic projects are at risk of being deferred or cancelled.
Statoil has already halted plans to drill in the Barents Sea this year and has also let several Arctic exploration licenses off Greenland expire.
In addition, the company’s Johan Castberg project could face delay for the third time. As announced in December 2014, Chevron has cancelled plans to drill in Canada’s Arctic, and in Russia, Western sanctions have thwarted Rosneft’s plans to explore Arctic waters.
The Russian state-controlled oil company will not be able to continue drilling in the Kara Sea in 2015, as a result of sanctions prohibiting its cooperation with ExxonMobil; drilling may begin in 2016 at the earliest.
Though there is widespread negativity surrounding projects, there is hope for Arctic oil yet. After a two-year hiatus, Shell plans a return to Arctic oil drilling this summer, in Alaska's Chukchi Sea. The super major will, however, need to win permits and overcome legal objections to do so. Shell has already spent $1 billion on preparations for the drilling work.
Another company that aims to continue drilling in the Arctic is Lundin Petroleum. The Swedish independent operator will carry on exploring the Barents Sea for new fields despite current market trends and in favour of a long-term view, which they believe will deliver value in the future. This year, Lundin plans to drill four exploration wells and OMV, Wintershall and Eni one each.