Still Too Cold for Comfort

April 19, 2013 | By More

Every few weeks an announcement about a new discovery, drilling campaign or less sea ice makes news, and the Arctic comes into the spotlight once again.  With up to a 7-year supply of natural gas at current consumption rates, the Arctic remains the largest untapped area for Oil & Gas on earth.  However, complex geo-political, environmental, and logistical challenges continue to keep significant Arctic development on the ‘to-do’ list.

tanker

As NSR finds in its Energy Markets via Satellite, 3rd Edition, Oil & Gas Arctic activities for the foreseeable future will be 80% small to medium-sized tankers, and 20% E&P-focused activities.  By 2022 the total number of In-service Units operating within the Arctic will be less than 100 – not even one-tenth of a percent of total Oil & Gas SATCOM Units.  Although talks about Arctic developments continue, the industry is proceeding at a cautionary pace.

The rapid melting of sea ice, along with internal pricing pressures in the tanker market, means the petroleum transportation industry will be a bigger user of the region.  Traversing through the Northern Sea Route can reduce a Europe to Asia journey by upwards of 7,000 nautical miles – a clear benefit to tanker operators.  However, the route remains limited to specialized tankers whose numbers are a small portion of the global tanker fleet.  Additionally, emergency and safety services commonplace along traditional routes are non-existent – increasing overhead for shippers through the region.  Ultimately, the Arctic will be a niche opportunity for the tanker community.

energy markets NSR

For Exploration & Production, the emergence of onshore shale gas and other unconventional resources mean the industry has yet to put its vast resources behind a significant move into the Arctic.  Although announcements about future activity continue – with Russia and Norway leading – geo-political, environmental, and logistical challenges present significant restraints on forward progress.  As the pace of onshore activities continues, there is enough lower hanging fruit elsewhere that the industry need not significantly invest in on-the-ground Arctic activities.

Bottom Line

With less than 100 In-service Units by 2022, the Arctic remains a niche opportunity for satellite service providers able to provide coverage and services into this challenging region.  Is the Oil & Gas sector talking about the Arctic?  Yes. Does the Oil &d Gas sector continue to move north each year? Yes.  However, there remains enough lower hanging fruit elsewhere that they need not risk environmental and public disasters in the quest into the northernmost corners of the world – yet.

Information for this article was extracted from NSR’s report Energy Markets via Satellite, 3rd Edition

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Category: NSR

Brad Grady

About the Author ()

Mr. Grady joined NSR in 2010 and provides assistance to the Senior Analyst team on multi-client research reports and single-client consulting projects throughout NSR’s coverage areas. Before joining NSR, Mr. Grady served as the Sustainable Development Projects Coordinator Intern with the Global VSAT Forum where he worked regularly with the GVF Secretariat and the Regulatory Working Group on many of the forum’s initiatives. Working with the Regulatory Working Group, Mr. Grady helped develop and implement the Global Regulatory Tracking Database which records current developments in the global satellite regulatory environment. In addition, he represented the GVF at numerous industry conferences and events during his internship. Mr. Grady holds a Bachelors degree in Economics from the University of Maryland, College Park where his research focused on both Information Communication Technologies and the Satellite Communications Industry.

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