Energy challenges

Oil extractionOil extractionWhat are the main challenges ahead - when thinking about the Arctic and energy? In many places the Arctic is perceived as a vast storehouse that houses minerals and hydrocarbons in abundance.

From the perspective of non-Arctic states, especially the EU, China, India and many others, there is a strong interest in securing supply for the ever growing energy demand, mainly after oil and gas from the Arctic. Especially China and India will play a leading role in the energy import in the future. 


The U.S. Energy Information Administration predicts in its latest assessment "The International Energy Outlook 2011" that world energy consumption will double during the next 30 years, from 505 quadrillion.

World oil consumption is predicted to increase from 85.7 million barrels per day in 2008 to 112.2 million barrels per day (225 quadrillion Btu) in 2035 or about 23 %. Gas consumption is predicted to increase 50 % from 2008 to 2035.


Despite the major increases of oil and gas consumtion in the next 30 years, electricity is predicted to increase its share of the world's total energy demand the most in all end-use sectors except transportation.

The EIA predicts that the world demand for electricity will increase by 2.3 percent per year from 2008 to 2035 outpacing the growth in total energy use.

With the growing demand and possibility of increasing accessibility, however, legal questions and disputes can arise. Who owns the resources in the Arctic Ocean? And what role will energy diplomacy play in the 21st century and the Arctic?


Yet the opposite is also true: Despite a growing interest in Arctic resources from an industrial side, the demand could remain rather fragile than robust. It is certainly not yeat a fact that activity in offshore areas will commence to a larger degree in the near future.


There are many incertainities such as the oil price, political framework conditions, technological developments, global demand and developments in other energy regions affecting the future development.


Apart from the resource aspect of energy, the Arctic countries themselves face a number of challenges:
 - How are they to build sustaining energy structures?
- Will there be a growing share of renewable energy sources, contributing to a diversification of economies?
- Will there be major investments in infrastructure and innovations such as smart-grids outside of Scandinavia and North-America?

Currently measures to increase energy efficency are often intensively debated. The extended use of renewable or alternative energy sources is ironically depending on very similar factors such as the oil and gas development: fossil fuel prices, political framework conditions, technological developments, global demand and developments in other energy regions play a role here.


This leads to the fact that nuclear power is still an option that many countries favor for the future. Currently, Russia and Finland are planning to construct new reactors and the very ambitious CO2 emission reduction plans, especially in Europe, are likely to keep nuclear based production on the map for some time to come.

How all these developments impact on environment or social structures of indigenous / local people of the Arctic remains yet to be seen.


Source: Megatrends Bing Energy and Capital ENSEC EIAs IEO2011

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