Lloyd’s of London market and the Royal Institute of International Affairs have released a new report which predicts huge risks for those looking to invest in the Arctic. The companies believe that if economic development ramps up in the region — with estimated investments reaching $100 million within the next decade — the lack of infrastructure and gaps of knowledge about the most northernmost part of the globe could outweigh the economic benefits of their projects. To that end, Lloyd’s chief executive officer advises companies interested in the region to “step back” and think about the long term consequences of their pipeline projects, which range from oil exploration to fisheries.
According to the report, several risks make the Arctic a potentially dangerous place to set up operations. Offshore drilling rigs may not be strong enough to withstand the frequent and harsh storms, and icebergs and offshore sea ice could be a danger to rigs and ships. Moreover, ships hauling goods or needed for a rescue mission in the Arctic will not have the same infrastructure available in much of the rest of the world. This is of course on top of all the potential to harm these activities will bring to the sophisticated ecosystems located throughout the region.
Several companies already have started, or are considering, oil exploration projects off the shores of Canada and Greenland. Shell and Cairn Energy have planned new oil wells, while Total, which is currently coping with a gas leak in the North Sea, has its sights on the Shtokman field near Russia. A BP project could attract up to $10 billion in investment in an Yamalo-Nenets, an autonomous region in far northern Russia. Oil is not the only resource, however; Lakshmi Mittal, currently the UK’s wealthiest man, has designs on a $22 billion iron ore mine 300 miles within the Arctic Circle.
To Lloyd’s and the Royal Institute, the dangers are not only the economic risks that could wipe out financial rewards, but they believe these actions could end up putting companies in “significant repetitional risks.” The report calls for Arctic Council members, which include the U.S., Russia, Canada and Scandinavian countries, to work together and promote strong regulations covering economic development within this region.
Via Huffington Post