Major energy companies such as Norway’s Statoil, France’s GDF Suez and Denmark’s Dong Energy have decided to end projects in Greenland as oil exploration there has became too expensive and risky.
A number of other companies, such as Shell, Maersk of Denmark, and Scottish Cairn Energy, are looking for a two-year grace period before investing in expensive oil exploration.
READ MORE: Oil plummet: Crude dives below $45 for first time since 2009
Cairn Energy invested around $7 billion in 2010 and 2011 in a series of projects that turned out to be unsuccessful. Now the interest has cooled as the company closed its office in Greenland in the New Year and has no plans to reopen it. The company slashed its workforce by about 40 percent and shifted its focus to West Africa from Greenland.
The outflow of investment is a tough blow for Greenland’s ambitions of becoming a mining center. In 2011, the country which is run as part of Denmark, earned $392 million in taxes from oil exploration. This compares to the total Danish budget of $39 billion.
GDF Suez says it is hard to imagine ever participating in Greenland exploration again.
“Given the current situation on the market together with the fact that Greenland is an area with very little infrastructure, rather large environmental requirements and a very challenging environment, it will be very expensive to develop these fields," said John Finborud, Director of GDF Suez Greenland.
3 Major oil companies drop Greenland #Arctic exploration: http://t.co/40rV1SmS1F#SaveTheArcticpic.twitter.com/DErDlaQbW9
— Greenpeace (@Greenpeace) January 14, 2015
Statoil has chosen to focus on the Barents Sea in western Norway and other places where the chances of winning are higher, said the company’s spokesperson Knut Rostad to Politiken magazine.
"When we have to evaluate the different licenses in the company's portfolio, we look at the global situation and prioritize the projects that have the best potential," he explained.
Although there’s still going to be a focus on attracting interested oil companies, the time has come to diversify natural sources, Birger Poppel, research project chief from the University of Greenland told RT. He says the goal of Greenland will be to develop other economic fields, such as the mining industry, and still focus on oil.
“There’s a population of 65,000 people here, so I think the concern will be to develop different kinds of economic activities,” he said.
The oil prices have seen the largest drop in six years with both Brent and WTI below $46 per barrel. Brent crude was trading at $45.79 a barrel at 12:15 MSK Wednesday; the price for WTI was $45.21.
Richard Wolff, economics professor at the University of Massachusetts, told RT “the continuous race between OPEC and the US,” was the major reason of the oil drop.
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