Denmark stakes claim to oil-rich Arctic
Russia and the US are going head-to-head in their fight for valuable resources at the North Pole. No, we’re not talking about control of Santa’s toy production operations.
The Arctic circle contains 30% of the world’s untapped natural gas reserves and 15% of the world's untapped oil, according to the US Geological Survey. The area is mean to be politically neutral, but no area with resources like that is going to stay neutral for long.
It is surprising, though, that the first nation to lodge an official claimfor control of the Arctic circle is not Putin’s Russia or Obama’s US. It is not even Canada or Norway, both of whom have strong claims. No, the first country to do so is wind-friendly Denmark.
Danish foreign minister Martin Lidegaard said Danish scientists have proof that the area is part of the continental shelf that links to autonomous territory Greenland. He is now taking the claim to the United Nations, although a decision is likely to take decades.
This should provoke questions among wind power investors.
Denmark has been a big backer of wind technology and spawned some of the world’s most high-profile wind firms, including turbine manufacturer Vestas and offshore developer Dong Energy. Firms such as Envision have also located some operations in Denmark.
It is also aiming to produce 100% of its energy from renewables by 2050. But is this battle for fossil fuels a sign that Denmark is turning away from renewables so it can become an extravagant oil state? Won’t this damage the wind sector Denmark has so lovingly built?
We see neither of these as risks. If the nation has a legitimate claim on energy resources in the Arctic circle then it should stake a claim regardless of its policy on renewables. It is not an indication that the country is turning away from its support of renewable energy.
In fact, if Denmark raises vast amounts of money from fossil fuels in the Arctic circle then the wind sector is also likely to benefit. We would expect the country to use these funds to help to support its 2050 renewables plan; and enable Danish manufacturers and developers to stay at the cutting edge of wind. In this case, fossil fuels and renewables aren’t necessarily in conflict.
The wider question, though, is whether the Arctic circle should be exploited like this at all.
This is undoubtedly a concern but, at risk of sounding like woolly environmentalists, we still think Danish control over Arctic energy sources could work well.
Russia and the US would have no qualms about setting up major industries in the region; Canada’s government is every bit as sceptical about renewables as Australia’s rightly-maligned leader Tony Abbott; and Norway would surely see this as an opportunity to further bolster its huge sovereign wealth fund.
In contrast, pro-renewables Denmark may rein excessive drilling by fossil fuel prospectors.
It would take a lot of Christmas wishing to secure Denmark a victory in this battle of energy superpowers. But, if it can, that is likely to work best for wind investors and for the world.