* Arctic production up to 20 years away -DNV CEO
* Other areas might be more attractive for exploration
By Nina Chestney
LONDON, April 15 Africa and Brazil are more
attractive areas for oil and gas exploration than the Arctic,
where firms will need 15 to 20 years to tap reserves due to the
harsh climate, the chief executive of Norway's DNV GL said.
DNV GL is one of the world's largest certification,
inspection, testing and advisory companies for the maritime, oil
and gas and renewable power industries.
The Arctic is estimated to contain 20 percent of the world's
undiscovered hydrocarbon resources.
Melting ice due to global warming has created opportunities
there for oil and gas companies, but they still face high costs
and risks at a time that most oil majors are cutting capital
"Any significant production will be 15 to 20 years away
except for the Yamal (peninsula), but that is onshore," Henrik
Madsen, DNV GL Group's president and chief executive, said in an
"I think there are more attractive areas in the world like
Africa and maybe Brazil. There is also lots of shale oil
around," he added.
On the Yamal Peninsula in the Western Siberian Arctic,
Russian gas producer Novatek is developing a $27
billion liquefied natural gas (LNG) project together with French
energy group Total and China National Petroleum Corp.
In Africa, meanwhile, improved seismic techniques and the
opening up of more countries to international companies have
increased the areas that are on the verge of oil production.
Uganda, Kenya, Ghana and Niger are among countries with new
oil fields that could produce over 100,000 barrels per day by
the end of the decade, while Mozambique and Tanzania are locked
in a race to be the first to export gas from East Africa, Madsen
Brazil's oil production prospects have risen since deepwater
"subsalt" reserves were found in 2007, which are estimated to
contain 35 billion barrels of recoverable oil equivalent, more
than double Brazil's existing reserves.
Since the middle of last year, most major integrated oil and
gas producers have announced reductions in their capital
"All the big oil companies are now a bit more cautious about
capital-intensive projects in difficult areas, the Arctic being
one of them," Madsen said.
"In terms of risks, you definitely can do it in a safe and
sustainable manner, but you have to do it one step at a time."
Gazprom has put the development of Russia's
Shtokman gas field in the Barents Sea on hold due to costs,
while Royal Dutch Shell has suspended its Arctic
drilling programme as part of a wider drive to cut spending.
One third of the Arctic is covered by land; another third
consists of the offshore continental shelf with waters mostly
less than 500 metres deep, and the rest is made up of ocean
waters deeper than 500 metres.
Arctic oil and gas exploration is expected to start in the
Norwegian part of the Barents Sea, an area with a maximum depth
of 450 metres that is technically easier to develop because
waves are less strong than in other areas and warmth from the
Gulf Stream keeps it free of ice.
Several firms are already focussed on that area, including
Austrian firm OMV, which last year found reserves of up
to 164 million barrels of oil.
Other areas could are more difficult.
"The shelf is not explored. It is a big job to do
exploration drilling there and also shooting seismic
(surveys)... There is not much new going on in Alaska. Around
Greenland it is very early days, and I am not sure that will
ever be developed," Madsen said.
Shipping activity in Arctic areas is also likely to rise in
coming years, but the risks will need to be managed, he said.
DNV GL has estimated that the risks are nearly 30 percent
higher for a cruise ship in Arctic waters than on conventional
routes due to survival challenges for the people on board.
For bulk carriers, the danger is estimated to be 15 percent
higher because of the risk of colliding with ice.
The Northern Sea Route from the Atlantic Ocean to the
Pacific Ocean runs along the Russian Arctic coast to the Bering
Strait and Far East. The entire route is in Arctic waters, parts
of which have a surface layer of ice for around 10 months of the
"What we fear most is if we get some cowboys up there. It is
not easy to navigate, it is quite shallow water, quite narrow
straits and there is ice, so you need to have really good
captains," Madsen said.
(Additional reporting by Alexander Winning; editing by Jane