Commercial exploitation of Greenland and the Arctic region… Denmark says, “We are not nervous”

By Flemming Emil Hansen, Dow Jones & Co, Image by Jeff Shea/NY Times

COPENHAGEN—Denmark this week launched its first formal strategy for the Arctic region, a plan intended to facilitate private investment and help international companies enter the far north as the ice melts and vast natural resources become accessible, the country’s foreign minister said in an interview.

The Arctic, which covers more than a sixth of the Earth’s landmass, plus the vast Arctic Ocean, has long been treated as a highly fragile ecosystem that must be protected against commercial exploitation. Denmark’s new strategy marks a shift in priority to focus on economic development and improving the living standards of local people, Lene Espersen told The Wall Street Journal.

“Previously, the discussion about the Arctic region has focused on the environment, on whether we oughtn’t to turn the region into one large natural preserve. But Denmark, Greenland and the Faroe Islands have agreed that we want to utilize the commercial and economic potential of the area,” Ms. Espersen said.

Environmentalists and nongovernmental organizations have traditionally opposed industrial development in the Arctic, and in June, Greenpeace activists boarded an oil rig belonging to Britain’s Cairn Energy in an unsuccessful attempt to block the first oil exploration drilling in offshore Greenland. But the government of Greenland, which, like the Faroe Islands, is a largely autonomous entity under the Danish throne, maintains that its people have the right to benefit from the riches of its land and waters. The new strategy makes this position Denmark’s official stance.

“With the new strategy we are opening up for international corporations from the whole world to come to the Arctic and to Greenland. The signal we are sending is that we will welcome them with open arms, we are not nervous, we are not afraid of letting industry into the area,” Ms. Espersen said, adding that all investments will be subject to strict environmental regulation.

Greenpeace expressed disappointment at the news. “It shows that Greenland’s economic independence is now prioritized over the environment,” Mads Flarup Christensen, executive director of Greenpeace Nordics, told The Wall Street Journal. “Denmark and Greenland display a very aggressive approach to the development of natural resources in and around Greenland—it’s quite discomforting.”

Chinese interest in mining in Greenland—with its wealth of copper, nickel, zinc, gold, diamonds and platinum, among other minerals— offers financial hope for the island, which receives 40% of its state budget in Danish subsidies.

The biggest Danish Arctic asset, however, is the vast oil and gas reserves off the coast of Greenland. The U.S. Geological Survey estimates reserves of 31 billion barrels of oil equivalent yet to be tapped off the west coast, while another 17 billion are estimated to sit under the seabed off the island’s east coast.

In all, Greenland has issued 17 exploration licenses for its west coast, to 11 companies. Of these, 12 licenses are active, but the only company currently test-drilling is Cairn Energy. The other license-holders include majors such as Royal Dutch Shell, ConocoPhillips, ExxonMobil, Chevron, Statoil, Petronas and GDF Suez, as well as Denmark’s own Maersk Oil and DONG Energy. In 2012 and 2013, Greenland plans to tender licenses for the east coast, which has a rougher climate.

In total, the USGS estimates the Arctic to contain some 30% of the world’s undiscovered natural-gas reserves and 10% of all oil reserves.

Rival Arctic powers are scrambling to take advantage of this potential bonanza. Last month, Russia said it would deploy two army brigades to the north to defend its interests in the region, and Canada is currently conducting its largest ever modern-day Arctic military exercise, involving more than 1,000 troops.

Ms. Espersen said another leg of the new strategy aims to secure the kingdom a key role in the development of the whole region. Denmark will work to achieve uniform region-wide environmental standards, common rules on coast guarding and a joint plan for the regulation of traffic through the Arctic waters.

Until recently, issues affecting the Arctic have been discussed primarily by the eight members of the Arctic Council, a group of countries abutting the Arctic Circle: Russia, the U.S., Canada, Norway, Denmark, Sweden, Finland and Iceland. But the organization is coming under pressure as commercial interest in the region grows, and other parties are keen either to get a seat at the table or to transfer responsibility to the U.N. At the council’s next meeting on ministers level in 2013, Denmark will push to enlarge the group, Ms. Espersen said, admitting new countries with observer status. This, she said, could help lend the council legitimacy as the key forum for Arctic matters.

“The European Union, China, Singapore, Italy and a number of other countries wish to join the council as observers, and I think it’s important that we welcome in countries with an interest in the region,” she said.

The minister also said Denmark will work to promote the establishment of a nature reserve in the disputed area around the geographic North Pole. In 2008, Denmark, the U.S., Russia, Canada and Norway, which are all expected to file claims for parts of the area, agreed to let the U.N. resolve the issue. But whatever happens, Denmark hopes the area will remain untouched. The disputed area holds about 3% of the Arctic’s estimated oil and gas reserves.

“Once the borders have been finally drawn, we hope it will be possible to reach a decision between the neighbors to turn it into a permanent nature reserve,” she said.

Flarup Christensen of Greenpeace said he welcomed the minister’s proposal for the area around the pole, but called for immediate action.

“In my experience, it’s difficult to make countries give the pieces back, once the cake has been sliced up and distributed,” he said. “If the minister is serious, Denmark should champion this proposal now instead of maintaining its claim.”