The recent agreement between oil-and-gas giants BP and Rosneft to explore and develop the hydrocarbons of the Russian Arctic brought the long-term potential of northern development back into the global spotlight. The alliance would be one of the biggest-ever collaborations between a Russian and a western company, and in a region that’s emerging as the focus of aggressive territorial disputes.
That’s because the stakes are enormous, as the importance of the frigid north to the economic, social and political development of the world heats up. This is especially true for the eight countries that control the land around the Arctic Ocean — Denmark, Finland, Greenland, Norway, Russia, Sweden, the United States and Canada — as they prepare to strengthen their claims to the strategically vital and lucrative terrain. Norway and Russia are buying up ice-breaker ships and submarines. In Canada, investors have snapped up the Hudson Bay Railway in northern Manitoba and the Port of Churchill, the only major Canadian Arctic seaport. Actual development will take decades, but northern countries are moving fast to improve infrastructure and social amenities in order to attract people and investment cash.
In his book The World in 2050: Four Forces Shaping Civilization’s Northern Future, Laurence Smith, a professor of geography and earth and space sciences at UCLA, argues that we’re about to see a productivity and culture boom in the north, driven by climate change, shifting demographics, globalization and the hunt for natural resources. The latter is drawing the most intense interest these days. Geological surveys indicate that Russia’s long coastline will yield vast quantities of natural gas, and Norway is eyeing the gas reserves buried deep beneath the Barents Sea. The U.S., meanwhile, hopes to develop oil beyond the North Slope of Alaska.
Canada’s coastal areas have extensive deposits of both fossil fuels, and investors have already poured billions into oil-and-gas licences off the East Coast and in the Arctic. Michael Byers, a political-science professor at the University of British Columbia and author of Who Owns the Arctic?, says the coming years will bring big economic opportunities for this country. “As natural resources become strained in other parts of the world, the Canadian Arctic will be an increasingly attractive place to do business,” he says, “whether that’s thanks to oil-and-gas development or alternative energy.” (Some of the world’s highest tides are in the region, Byers notes.) But the race to tap these resources will require international partnerships. Last fall, Byers attended a conference on Arctic boundaries in Moscow where the keynote speaker was Prime Minister Vladimir Putin. “He was talking about the need for co-operation, because Russia realizes it needs both western technology and western capital to develop its oil and gas.”
Some countries will also need to substantially boost their northern infrastructure — Canada among them. We lack transport bridges, and the Northwest Passage has insufficient border controls to monitor the movement of ships, workers or even tourists. On these fronts, Finland, Norway and Sweden are far ahead, says Smith. “The Nordic countries have highways, universities and infrastructure almost all the way up to the Arctic. Canada and Russia don’t. One of the reasons is that the Nordic Arctic isn’t actually very cold. It’s warmed by the Gulf Stream. [Nordic countries] are smaller, wealthy cultures, and they’ve been up there a long time.”
Nevertheless, Canada’s infrastructure in the north has recently benefited from the boom in the oilpatch. Fort McMurray, its quasi-urban hub and Alberta’s most expensive city, has seen population nearly double over the past decade, to about 77,000, and projections call for another doubling within two decades. To encourage more permanent residents, the town recently spent about $170 million to build the country’s largest recreation centre, complete with an aquatics park.
Grande Prairie, also in northern Alberta, is another community experiencing significant growth, with population up almost 50% in the past decade, thanks to oil and gas, agriculture and forestry. Further east, new hydro projects promise to attract workers northward, as well. Newfoundland and Labrador is constructing the massive Lower Churchill hydropower facility, and Manitoba is expected to begin building the Conawapa Generating Station, which would be the largest hydro-electric plant in the province’s north.
But the pull to the northern reaches isn’t driven solely by natural resources. In time, climate change is expected to spur a slow, global northern migration as temperatures become more hospitable closer to the Arctic. In the short term, melting ice may make access to the north harder, says Smith. “People hear ‘global warming’ and they think it will open everything up,” he says. “But actually it’s going to shut down a lot of the interior because winter roads are going to become less economically viable.” He predicts that shipping will increase, especially since it’s much cheaper than land transport. Smith also thinks resource extraction will shift toward the coasts and rivers, turning Canada’s northern coastal towns into maritime transportation hubs.
Retreating ice will additionally make the Northwest Passage a more attractive shipping route. Canada is already seeing increased traffic there — in 2010, 18 ships passed through, up from seven in 2009. Since many large components for oil refineries are made in Asia, the manufacturers could find shipments through the Far North cheaper and faster than alternate routes. Tourism should also see a boost, as is already happening in Greenland. Last year, the island ran nearly 200 tour boats, and docked more than 400, when a few years ago there were only a handful.
What stands in the way of rapid development are numerous boundary disputes, says Peter Harrison, director of the School of Policy Studies at Queen’s University. But Harrison, who was largely responsible for shepherding the ratification of the UN Convention on the Law of the Sea (UNCLOS) in Canada in 2003, sees progress. The treaty stipulates that if a country can prove its continental shelf extends down to the sea floor, that country may file a claim with the UN seeking sovereignty over the seabed — and whatever lies beneath it. “We’re now defining the limits of our jurisdiction,” says Harrison. “It will change Canada on the East Coast and the Arctic. The extension of the continental shelf will add the equivalent area of Manitoba, Saskatchewan and Alberta combined.”
Smith thinks all these trends will result in small boom towns sprouting around the northern latitudes, much like Nevada developed out of the desert. But the Arctic’s “prime socioeconomic role in the 21st century will not be as a homestead haven but an economic engine,” he says. Resource development will make the region lucrative for investors, but the climate change and social infrastructure needed to attract people en masse is a long way off. Ultimately, the challenge will lie in preventing economic gains from causing environmental losses.
Players to watch:
The steel giant has teamed up with a North American group to take control of Baffinland Iron Mines, whose Mary River project aims to become the first iron-ore mine in the Arctic. With a seaport and railroad, it’s pegged to cost $4 billion.
Jericho, Nunavut’s only diamond mine, has a new owner and management team, which plans to restart operations in 2012.
The Russian company will start preliminary drilling this summer on an oil-and-gas field on the Yamal peninsula, a frigid area promising high yields.
In November, the Norwegian company started testing a floating power plant north of the Arctic Circle that generates power from tides.
The Inuit-owned shipping company is fielding increasing inquiries about export shipments via the Arctic from Asian companies and others.