Greenland calls time on oil, gas exploration

Greenland has announced it will end its half-a-century search for oil and gas, judging that the cost of production would be too high to be commercially viable.

A recent study by the Geological Survey of Denmark and Greenland estimates that there are 18bn Danish kroner ($2.9bn) in de-risked barrels of oil on Greenland's west coast, and additional large deposits are thought to exist off its east coast. However, the government said on July 15 that it believed "the price of oil extraction is too high. This is based upon economic calculations, but considerations of the impact on climate and the environment also play a central role in this decision."

The government has therefore ceased issuing new licences for oil and gas in Greenland, citing the need to protect its nature, fisheries and tourism. Greenland's minister for natural resources, Naaja Nathanielsen, said the country would be "better off focusing on sustainable development, such as the potential for renewable energy."

The move comes half a year after Denmark's parliament also voted to end oil and gas licensing. For Greenland, a self-governing territory of Denmark, the decision marks a significant shift in policy. Just a year and a half ago, the government adopted a new oil and gas strategy aimed at promoting more exploration.

Greenland has been searching for oil and gas since the 1970s, with initial efforts incentivised by surging oil prices that decade as a result of OPEC curtailing supply. After gaining full control of its subsoil resources in 2009, Greenland brought in UK explorer Cairn Energy, which hit gas off the island's west coast the following year. Hopes were that this was an early indication of oil reserves, but Cairn went on to spend more than $1bn on dry wells. 

Undeterred, BP, Chevron, ConocoPhillips, Eni, Equinor and Shell picked up exploration licences in Greenland in 2013, but these companies later withdrew without making any discoveries. Greenland currently has four active hydrocarbon exploration licences, one of which is held by Panoceanic Energy and state-owned Nunaoil, and three more controlled by Greenland Gas & Oil.