From Iceland — Here Be Dragons

Here Be Dragons

Published February 11, 2015

A brief summary of debates surrounding oil exploration to the north of Iceland

Here Be Dragons

A brief summary of debates surrounding oil exploration to the north of Iceland

In the late 1960s and early 1970s, French and American geologists conducted surveys in the Norwegian Sea and discovered the Jan Mayen Microcontinent about 1,000 metres below sea level. It is a fragment left over from when the borders of Norway and Greenland were joined together in a single continent, which means there is the possibility of existing resources.

In January 2009 Orkustofnun, Iceland’s National Energy Authority, announced that it would be conducting the first licensing round for hydrocarbon exploration and production licenses. After a thorough application process, companies were invited to lease rights to search for oil in the area known as Drekasvæðið (“The Dragon Region”). In the 2014 agreement, companies pay 10,000 ISK per square kilometre per year (which comes out to around 63 million ISK annually for the company with the largest area) for the exclusive right to see if they can find any useable resources. So far, no findings have been reported.

So, private companies are paying the Icelandic government significant amounts of money for the right to pour their own time and funds into looking for resources way outside of Icelandic territorial waters with no definitive guarantee that they will find anything extractable.

Environmental concerns

Nonetheless, the possibility of Icelanders one day drilling for oil makes many people understandably uncomfortable. In December 2012, two government ministers—Minister of Industries and Innovation Steingrímur J. Sigfússon and Minister for the Environment Svandís Svavarsdóttir—expressed strong environmental concerns about drilling for oil in Icelandic waters. Steingrímur insisted that before any drilling begins, there must be a guarantee that no chances may be taken that could damage the environment or fish stocks, and that no industrial accidents could happen. Svandís also later stated that “ideas of oil exploration might put the ecosystem of the Arctic Ocean at risk.”

Directions to Dreka­svæðið from Reykjavík:

Head northeast on Route 1 for 432 km. Left turn onto Route 85 and follow for 205 km. Continue onto Route 869 for 47 km. Board boat and head northeast for a further 337 km.

These warnings did not fall on deaf ears. In January 2014, about 70 protesters stood outside the Culture House as ministers met to agree on the new license agreement. In a joint statement, the organisations involved in the protest called climate change “the greatest problem facing humanity,” and expressed anxieties over effects drilling could have on the ecosystem.

This past November, the United Nations-backed Intergovernmental Panel on Climate Change (IPCC) published a report saying that the unrestricted use of fossil fuels must be phased out by the year 2100, to avoid “dangerous anthropogenic interference with the climate system.” Many people saw this report as calling for an immediate halt to fossil fuel production, and became increasingly concerned about the particulars of oil exploration in Drekasvæðið. This was somewhat reactionary, as the report simply said that more effort needs to be made in development of renewable energies, and that countries need to be more mindful of their CO2 emissions so that by 2100 there is no longer a need for irresponsible mass production of coal, petroleum, natural gas, and other fossil fuels. This is 85 years into the future. Indeed, 85 years ago, oil production had not yet begun on the Arabian Peninsula, so there is no certainty that fossil fuels will be the dominant global energy source in another 85.

This is not to say environmental concerns are unwarranted. Stephen Macko, fossil expert and professor at the University of Virginia in the US, says that if a spill like Deepwater Horizon were to occur in the region it would devastate fishing, as well as do irreversible damage to the Arctic. Ultimately, the BP oil spill was deemed “an entirely preventable disaster” by the American White House’s oil spill commission. Any production in Drekasvæðið would be governed by much stronger regulations than there were in the Gulf of Mexico, which would make a disaster like that one very unlikely, but it is impossible to have complete insurance against human error.

Legal concerns

Following the IPCC report, Kristín Haraldsdóttir, a professor of law at Reykjavík University and the new legislative assistant to the Interior Minister, indicated that companies might have a legal right to dispute a decision to not produce if oil is found. When we reached out, Orkustofnun’s legal advisor confirmed this to be true. The agency’s hydrocarbon licensing manager, Þórarinn Sveinn Arnarson, further clarified that relevant parties “have to fulfil all their requirements before they can change their license from an exploration license to a production license,” including a description of how they would go about production and what the environmental factors are.

Indeed, the Icelandic government has “the power to approve or not approve the plans of the oil companies at predefined steps in the process,” as Orkustofnun senior advisor Kristinn Einarsson told us. He added that “a decision to stop production would have to be based on solid arguments, not on a whim.”

Legislative concerns

In 2013 a Norwegian investigative reporter, Harald Birkevold, said that “Icelandic authorities must show prudence and foresight to ensure that the public benefit from the oil industry in the future,” and that civilians rarely benefit when countries find oil and begin production. Harald’s advice should not be taken lightly. While most oil-producing countries started with a concessionary system with foreign companies paying rents for the rights to production, many eventually nationalised their industries so the profits could better benefit their citizens.

With this in mind, I asked the managing partner at Askja Energy, Ketill Sigurjonsson, what he thinks the ideal way to set up an Icelandic oil industry would be. He said that while it “is possible that an Icelandic state-owned firm would be set up,” it is unclear whether the government is financially capable of doing so. When prompted with the same question, Þórarinn indicated that an ideal system for Iceland would follow the Norwegian model of a mixture of public and private companies, but added that such decisions are still very far into the future.

Here be dragons?

The phrase “here be dragons” dates back to the beginning of the 16th century, when cartographers drew sea monsters on maps denoting unknown territories.

What lies beneath the Jan Mayen Microcontinent is not yet known, but, then, that’s what makes it exciting.

Anna Manning is not only one of our current crop of wonderful interns – she also holds an MSc International Relations Theory with a focus on resource politics.

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