Arctic Oil Boom

Norway is vying for its rightful place in the Arctic oil boom.

It’s been a long haul, and after a four decade battle with Russia over territory of the southeastern Barents Sea, Norway is making definitive progress in oil exploration.

Last Wednesday, Norwegian officials revealed that the nation’s estimate of oil and gas is roughly 18.7 billion barrels of oil equivalent (boe), or 15 percent higher than before; after mapping the Arctic zone of Russian borders and Iceland revealed more oil and gas, the nation increased estimates by 2.5 billion boe, Reuters reports.

Rosneft Oil Co. (PINK: RNFTF) has purchased three licenses on the Russian side of the Barents Sea, as Fox Business reports, and Norwegian oil company Petoro AS has taken a 25 percent stake in an Iceland-licensed Faroe Petroleum PLC (LON: FPM) and Valiant Petroleum PLC (LON: VPP) operation.

Norway plans to release its drilling efforts this coming summer for its two oil regions: the Barents Sea and Jan Mayan. Russia and Iceland have already awarded licenses in their own Jan Mayen territories.

The Barents Sea holds about 1.9 billion boe, mostly comprised of gas – only 15 percent is crude oil. This makes it less profitable for oil companies, but it is still more than one year’s production of gas and oil for the nation, according to Reuters.

As Fox Business reported, the Norwegian Petroleum Directorate (NPD) says the Barents Sea holds at least 345 million barrels of undiscovered resources, and there was a 5 percent chance it could be as much as 3.6 billion barrels.

The Jan Mayen area may hold as much as 566 million boe, the NPD stated in a Fox Business report, but there is also a possibility it is void of oil altogether. But if the resources are present, it could max out around 2.9 billion barrels.

Currently, Norway’s oil output is in decline and will reach a 25 year low in 2013. The oil that Norway does have in operation is producing less and less, especially in the North Sea, where fields are simply beginning to dry up.

The boe results presented Wednesday could not possibly have come at a better time. Norway hasn’t opened new oil acreage since 1994, and looking to the north, which carries more and more potential, could spring the rejuvenation that is needed.

Bente Nyland, head of the NPD, told Reuters:

“This is very exciting. We are very happy that the results are as promising as they look. This means that we have better possibilities for developing the area with a long-term perspective.”

Norwegian Prime Minister Jens Stoltenberg and German Chancellor Angela Merkel have had several meetings in recent months that include talks on Arctic development. Norway has supported the involvement of non-Arctic states all along and stresses the involvement of European companies in economic endeavors, reported the Alaska Dispatch.

Germany has Europe’s largest economy, and it is essential for the nation to be on good terms with Norway, a country that will most likely be a supplier of oil if drilling does proceed as expected.

According to the Alaska Dispatch, Germany imported 60 percent of its energy needs in 2009, and Norway was its second biggest supplier of both oil and gas behind Russia.

Experts believe it is more likely there is more oil on Russia’s side of the border and more gas for Norway, though some of the deposits may find themselves on both sides of the line. This could, naturally, create a political rift, especially when drilling operations on one side of the border saps resources from the other.

This issue, however, is not pressing, and it will be addressed after other deposits are tapped.

Licensing isn’t expected to be offered for at least two more years from Norway, but discoveries have already been made: Statoil (NYSE: STO), Total (NYSE: TOT), and Eni (NYSE: E) already have their sights set.

For now, Norway is still mapping its landscape, and as it ventures north, more and more oil is expected to be found through the summer. The boe will continue to expand during this process, and the Norwegian economy can feel confident of a promising future.

An estimate for future reserves will not be made at this time, and newly mapped areas will not be opened any time soon.