Imagining 2030

Imagining 2030: The Far North

Imagining 2030 is a series in which PS21 writers describe the world as they see it in 14 years time.

Icebreaker_Kapitan_Khlebnikov_in_Arctic

A printer-friendly version is available here.

Imagining 2030 is a series in which PS21 writers describe the world as they see it in 14 years time.

Gabrielle Falardeau is currently completing a Master’s degree in War Studies at King’s College London. Her research focuses on energy and maritime security with a special focus on the Arctic.

It’s 2030, the Arctic landscape has changed significantly both geographically and ecologically over the last few decades. The transition from ice and snow to open water has increased the availability and access to natural resources and shipping routes. However, the increased economic activity in the Arctic has not been linear and has suffered various setbacks.

To begin, the North Sea Route has seen increased navigation. This route currently allows ships from North East Asia to transport cargo to Europe and even the Canadian and American East coast. Before 2010, this route was not possible, but now that there are longer periods of navigable waters extending from June to October it’s a viable option. As such, this shipping route is now an alternative for ships who wish to reduce travel time and some associated costs. Indeed, the North Sea Route is 40 per cent shorter than traditional routes for ships traveling from China to Northern Europe. It has also allowed merchant ships to circumvent chokepoints and other dangers along the traditional sea route through the Suez Canal.

That being said, use of the North Sea Route has not become as widespread as some had hoped because of the sustained challenges and limitations that the Arctic environment presents. First, weather patterns and moving ice continue to present a danger to traveling ships. Second, companies wishing to navigate through the Arctic need to account for additional costs and therefore need to be certain of the viability of the North Sea Route. In fact, since the adoption of the Polar Code in 2014, all ships traveling through the Arctic have been required to adopt additional protection measures (such as dual hulls) and therefore additional expenses. Furthermore, the additional cost of building and fueling an ice-class cargo vessel, or the cost of the alternative icebreaker escort increases the overall price of shipping via the Arctic. This in turn reduces the cost efficiency of the North Sea Route as an alternative. Finally, because of the characteristics of the Arctic environment, there is an imposed size limit on ships wishing to travel through the North Sea Route.

Despite these disadvantages, the North Sea Route has seen increased – but not abundant – traffic due to its ability to diversify trade routes. The alternative Arctic shipping route through the United States, Canada and Greenland, the Northwest route, currently remains unavailable because of sizable ice barriers.

With regards to energy resources in the Arctic, because of the elevated startup costs, the challenging nature of the environment as well as its distance from established infrastructure and markets, development in the Far North has not been an easy venture, nor as successful as people had predicted it would be in the early 2000s. As such, the Arctic continues to be an area of interest for oil and gas extraction, but the market’s growth has been slow and somewhat unsteady. This rate of growth has resulted from economic and political setbacks, as well as environmental concerns.

Because of Russia’s extensive oil and gas reserves in the Arctic and the government’s strong emphasis on natural resource development, the country has easily become the most important developer of the Far North. Despite this, their plans for the Far North have already suffered delays. The reasons for these delays are twofold. First, the economic sanctions which resulted from their involvement in the Ukraine in 2014-2015 restricted Russia’s ability to procure western (namely American) technology. It also restricted the ability of Russian companies to conduct joint ventures in order to attract foreign investment and expertise. Although Chinese investors demonstrated a willingness to support Arctic initiatives, Russian companies were not able to move forward without the technology and expertise that only western companies could provide. Finally, Arctic development was inconceivable until 2020 when oil prices increased sufficiently to compensate for high startup and ongoing costs.

When the sanctions were lifted during the fall of 2020 and oil prices increased to over $80 per barrel, Russian energy development saw a notable increase. Until that occurred, Russia focused on opportunities in less challenging onshore energy fields in East Siberia, as well as unconventional oil.

In other Arctic states, energy development was met with resistance from the environmental community. Activists pressured Arctic states to restrict energy development in the area because of possible consequences to global temperatures, sea levels, weather patterns, as well as the fragile local ecosystem. Greenpeace’s ship Arctic Sunrise has on several occasions disrupted oil and gas projects, as well as tanker ships traveling through the North Sea Route, resulting in damages. These activists have sought to highlight the effects of resources extraction in the Arctic on global warming. Indeed, the Far North continues to lack the proper safeguards across states to  capture and transport the natural gas – mostly methane gas – that is emitted when drilling for oil. If companies choose to burn the methane gas because of the absence of adequate infrastructure, a layer of soot will be scattered across the ice and snow. The soot will then absorb the solar energy that would normally be reflected by the snow. This then results in warmer waters and melting ice.

Furthermore, even with proper safeguards, there is still the danger of a potential oil spill in the Far North. Because of the fragility of the local ecosystem as well as the difficulty to clean up oil in cold and icy waters, environmentalists showed deep concern for Arctic development. This pressure in turn slowed down – but did not halt – energy development in the Arctic.

Altogether, the Arctic has been an area of growth, but it is not yet considered an emergent market. Despite predictions in the early 2000s that the growth in the Far North would skyrocket, the political, economic, and environmental challenges surrounding ventures into the Arctic, as well as various climate related difficulties, made rapid growth in the Far North simply not possible. Instead, the Arctic market requires additional time to evolve into an emergent or even an emerging market.

Interested in contributing a piece to the series? E-mail us at imagining2030@projects21.org.

Project for Study of the 21st Century is a non-national, non-ideological, non-partisan organization. All views expressed are the author’s own.

0 comments on “Imagining 2030: The Far North

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: