Photograph by Dmitry Korotayev, Kommersant Photo/Getty

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A Russian oil rig sits in the Barents Sea, where Norway has just opened more leases for its own energy exploration.

Photograph by Dmitry Korotayev, Kommersant Photo/Getty

Norway Offers New Arctic Leases, Stoking Polar Energy Rush

The country's expansion of oil drilling territory is the first in two decades.

Despite sinking oil prices, Norway this week signaled its commitment to drilling for Arctic oil by offering new leases in the region for the first time since 1994.

The Norwegian move came as President Barack Obama issued an executive order setting up new oversight of U.S. Arctic activity, including energy exploration. And it follows Denmark's claim last month to oil and gas beneath the North Pole. (See related story: "Denmark Eyes North Pole, But How Much Oil and Gas Await?")

Russia, meanwhile, is beefing up its forces in the region this year. It's all part of a rush to stake out boundary lines as the ice melts in an area that holds 13 percent of the world's undiscovered oil and 30 percent of its undiscovered natural gas—the vast majority of which is offshore. (See related story: "What Happens When Oil Spills in the Arctic?")

In opening up the oil territory, which lies primarily in the Barents Sea, Norway pointed to new sea ice data showing that the edge had retreated farther north.

"It's quite a paradox that as the ice is melting in the Arctic as a result of global warming—and as a direct result of burning fossil fuels—Norway is eager to enter in [and drill] once the ice edge moves," said Nina Jensen, secretary general of World Wildlife Fund Norway, calling the decision "a huge disappointment."

The drive to open up new exploration even as a glut of supply sends oil prices below $50 a barrel shows that corporate interest in the icy region's energy sources goes beyond the immediate financial pain.

"The oil industry is looking at this as long, long-term investments" that won't likely kick in until the late 2020s, said Charles Ebinger, an energy expert at the Brookings Institution, a Washington-based think tank.

"Long-Term Value"

Norway's ministry of petroleum and energy cited the industry's economic woes as a reason for the leases. "New and attractive exploration acreage is important to the long-term value creation from the Norwegian shelf," it said in a statement. "This is particularly important with the current challenging situation in the industry."

Statoil, one of 43 companies being invited to apply for the leases, welcomed the decision. "Access to new quality acreage is essential to ensure continued exploration activity," said Irene Rummelhoff, senior vice president for Norwegian continental shelf exploration. (See related story: "Arctic Shipping Soars, Led by Russia and Spurred by Energy.")

The Norwegian government said that the new plan, which would award production licenses beginning in 2016, includes time restrictions on drilling to safeguard "important environmental assets" along the ice edge. Sea ice is a critical part of the habitat for Arctic wildlife including polar bears, harp seals, and marine birds.

Arctic Scramble

The five Arctic countries—Canada, Denmark (via Greenland), Norway, Russia, and the United States—have exploration and resource rights to areas within 200 nautical miles of their coasts. Beyond that, they can make a case (as Denmark did last month) to broaden their domain via the U.N. Convention on the Law of the Sea, which the U.S. has not yet ratified. That process, however, can take several years. (See interactive map: The Changing Arctic)

In the meantime, the nations coordinate their interests via commercial partnerships such as Russia and Norway's joint exploration project in the Barents Sea, and via the Arctic Council, an "intergovernmental forum" that also includes Finland, Iceland, and Sweden. The United States takes over chairmanship of the forum from Canada this year, which Obama cited in his executive order this week.

Obama's order "sends a signal that Arctic issues are a U.S. priority, and that the U.S. takes its upcoming chairmanship of the Arctic Council seriously," said Marilyn Heiman, U.S. Arctic director at the Pew Charitable Trusts, a nonprofit research organization. (Take the quiz: What You Don't Know About Energy in the Changing Arctic.)

Norway's plan faces a battle in parliament, where opposing parties have urged that some of the northernmost lease blocks be removed. Either way, Norway and other nations seeking to develop oil and gas in the Arctic will need to balance the thirst for new fossil fuel resources with increasing pressure to act on climate change ahead of December talks in Paris.

A study earlier this month suggested that, as far as the Arctic is concerned, there is no room for negotiation: To stay within the international target of warming by no more than 2°C, researchers calculated, the oil beneath its frigid waters must remain there. (See related story: "Climate Mission Impossible: Scientists Say Fossil Fuels Must Go Untapped.")

Additional reporting by Wendy Koch.

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The story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.