A global oil glut has tanked prices and cut profits—so why won’t Shell give up on the north? ... geologists believe that beneath Burger J—70 miles offshore and 800 miles from the Anchorage command center—lie up to 15 billion barrels of oil. An additional 11 billion barrels are thought to be buried due east under the Beaufort Sea. All told, Arctic waters cover about 13 percent of the world’s undiscovered petroleum, or enough to supply the U.S. for more than a decade, according to government estimates. ... Surprise lurks in the Chukchi, whose frigid waters north of the Bering Strait span from Alaska to Siberia. Logistical and legal obstacles have repeatedly delayed the Arctic initiative, on which Shell is spending more than $1 billion a year—more than $7 billion so far and counting. The single well in the Chukchi Shell aims to excavate this summer could be the most expensive on earth, and it hasn’t yielded its first barrel of crude. ... Shell’s Scenarios group, an in-house think tank that management points to as an emblem of its open-mindedness, has done extensive work undergirding the company’s support for government policies encouraging development of renewable energy sources, she says. But the Scenarios research also justifies aggressive exploration for more crude. With the global population rising from 7 billion to more than 9 billion by 2050 and total energy demand nearly doubling ... Most of the world’s “easy oil” has already been pumped or nationalized by resource-rich governments, Pickard says, leaving independent producers such as Shell no choice but to pursue “extreme oil” in dicey places.
As global warming thaws the Arctic, Russia is leading the rush to exploit the region’s resources. In late 2013, on a platform in the Pechora Sea, Gazprom became the first company to produce oil offshore in the Arctic, after jailing 30 Greenpeace protesters and confiscating their ship. On the east side of Yamal a partnership led by another Russian company, Novatek, is building a giant terminal to liquefy gas and export it to East Asia and Europe by ice-breaking tanker—though over time there may be less and less ice to break. ... Russia is not alone. More than a fifth of the world’s conventional oil and gas that has yet to be discovered lies above the Arctic Circle, according to a 2008 estimate by the U.S. Geological Survey, and the region is rich in other minerals too. ... Given the hype on both sides of the argument, what’s striking is how patchy the Arctic rush actually is. Few companies have dipped their toes into Arctic waters, and fewer still are making a profit. Last fall Royal Dutch Shell abruptly abandoned its multiyear, seven-billion-dollar effort to extract oil from the Chukchi Sea off Alaska after drilling a single unpromising hole. Record-low oil prices likely contributed to the decision. So did the astronomical costs of operating in a region where infrastructure is sparse, distances are huge, and the weather remains horrific.
Twenty-five years after the first diamonds were found in Canada’s Northwest Territories, it’s still a game of hurry-up-and-wait. For every thousand grassroots exploration projects, only one becomes a mine. Snap Lake, one of three operating mines in the region, was shuttered by De Beers last year, a casualty of harsh geography and falling diamond prices. Government attempts to add production value with a cutting industry collapsed years ago; all that remains of “Diamond Row” in the territorial capital Yellowknife is a line of derelict buildings behind barbed wire. ... And yet the dream lives on. At a time when global miners are shedding assets, De Beers is about to open the largest new diamond mine in the world, Gahcho Kué, 280 kilometers (175 miles) northeast of Yellowknife. A little further north, Rio Tinto Group last year found—and just sold—the largest gem-quality diamond ever recorded in North America at its Diavik mine, the 187-carat Foxfire. Dominion Diamond Corp. last week agreed to extend the life of the neighboring Ekati mine beyond 2020.
Above the Arctic Circle in Alaska, a half-day's journey by snowmobile from the nearest paved road or tree, a village called Kivalina sits on a slip of permanently frozen earth bracketed by water — a lagoon on one side and the Chukchi Sea on the other. Every spring, when daylight returns to the village after months of darkness, people stand in the snow outside their storm-battered cabins and look out at the sea, hoping this will be the year. ... Some Alaskan villages catch a whale every year. Kivalina was never that lucky, partly because it occupies a spot on the coast that's farther from the migratory path of the bowhead whale. Still, there was a time when villagers could reasonably expect to land a whale every three or four years. Those days are gone. ... It had been 21 years since the last successful whale hunt, 21 years of futility and disappointment, and yet, for reasons I didn't fully understand, the villagers hadn't given up. When I asked Reppi Swan why they still did it — why they still risked their lives and spent so much of their time and money pursuing a goal that always eluded them — he was succinct. "It's who we are," he said.
This is Tiksi, a decaying town in the Russian Arctic. Here, more than 4,000 kilometres from Moscow on the coast of the Laptev Sea, 4,550 people inhabit a wasteland whipped by blizzards and wrapped in polar night for half of the year. Surrounded by thousands of kilometres of permafrost, the town has no outside land connection. Its main lifeline is an airport manned by a military unit, a relic of Soviet times, when the country’s Arctic territory was dotted with military bases. ... Global warming, which is causing Arctic sea ice to melt at an unprecedented pace, is watched with alarm in other parts of the world. But in Russia, the rising temperatures are fuelling expectations that the waters along its northern coast, long a frozen frontier, could once again become a vibrant shipping line, rivalling some of the world’s most important trading routes. ... In theory, the NSR could compete with routes that have dominated global maritime transport for decades. Calculated between the ports of Yokohama and Hamburg, the 7,200 nautical miles shipping distance between Asia and Europe using the NSR is 37 per cent shorter than the southern route via the Suez Canal. ... Total cargo transport volumes plummeted from a peak of 6.58 million tonnes in 1987 to just 1.46 million tonnes in 1998. ... total cargo volumes recovered to 5.15 million tonnes last year, almost back to the level of 1990. ... The idea of mastering nature is very much part of Russian identity, as is the myth of conquering the Arctic, despite the decline of Moscow’s footprint in the far north over the past 25 years. ... Since there is still a lot of ice on the northern oceans, this makes passages risky and drives up insurance premiums. Only ships with reinforced hulls can use the NSR with relatively few restrictions and even for them passage times remain unpredictable. The waters off Russia’s coast are also far shallower than those on the southern route, meaning that the world’s largest, most cost-efficient container ships can’t be used.