Russian Drilling Increases Despite Sanctions, While US Development Still Stunted by Regulations

April 25, 2017 in Blog, Featured

Following Russia’s involvement in Crimea in 2014, the country faced economic sanctions from the US and European Union that many believed would make the technologically challenging and expensive effort of developing Russian Arctic resources nearly impossible. However, the recent increase in oil and gas activity in the Arctic Circle, even with sanctions impeding the development process, shows the priority the country places on Arctic resource development– a priority that is yet to be fully realized in the United States.

The Arctic Circle as a whole is estimated to hold 90 billion barrels of oil and 1,669 trillion cubic feet of natural gas, with about 84 percent of those resources residing offshore. The United States Geological Survey estimates that roughly 28 billion barrels of oil and 181 trillion cubic feet of natural gas (associated and non-associated) is in the Alaskan Arctic region alone, noting the region is “one of the most prolific petroleum provinces in North America.”  In comparison, Russia’s Laptev Sea Shelf, where the recent offshore drilling efforts are focused, is thought to hold just over 3 billion barrels of oil and 32 trillion cubic feet of natural gas, while the nation’s entire Western Siberian Basin holds an estimated 651 trillion cubic feet of gas.

But while the estimated resources of Russia’s Laptev Sea Shelf alone may be less oil and gas resources than those locked away in US Arctic waters, Moscow has still undertaken the challenge of developing the field’s vital resources. Oil and gas produced from the Russian Arctic shelf region is estimated to generate up to $20 trillion, providing as much as 30 percent of the country’s oil production by 2050.

Interestingly, Russian Arctic development has increased despite facing greater headwinds than development in US Arctic, due to economic sanctions put in place by the US and European Union. These sanctions have restricted foreign investment and the sharing of production technology within the country, making the challenge of successfully producing in the Arctic’s seas more difficult. However, the Russian’s recognition of what Arctic development means, both economically and in terms of energy security, has led the country to develop its own technology and find other funding sources to overcome these issues.

This same recognition of the benefits offered by Arctic oil and gas development is what needs to be fully realized in the United States, in order to overcome the regulatory burden imposed by the previous Administration. The vast majority of the US Arctic is still sequestered following former President Obama’s ban on oil and gas activities in 115 million square miles of Arctic federal waters, but such a ban can be overturned by the current Administration.  In fact, that process appears to be already underway.

As the increase in Russian Arctic oil and gas activity has shown, the region is critical for economic growth and ensuring continued energy security. With Moscow working to overcome the sanctions that made Arctic development even more challenging, the United States historic refusal to allow the development of its own significant resource potential, risks seeing us left behind in the development of critically important new geography.