On November 25th, 2008, Greenlanders voted 75% in favor of autonomy from Denmark. Some journalists and observers see this as a step toward eventual independence, but Greenland does not have until then to forge its own economic future. In return for home-rule, the almost $600 million annual subsidy from Denmark will be phased out. That represents half of the island's economy. Fortunately for Greenland, it is on the verge of becoming the world's next oil-boom economy.
Greenland's Oil and Natural Gas
A recent US Geological Survey has found that Greenland's two largest off-coast regions may possess combined oil reserves of upwards of 16 billion barrels of oil (on a par with Qatar) and combined natural gas reserves of 138 trillion cubic feet (on a par with Algeria).
Clearly aware of the resource trove it is sitting on, Greenland's Bureau of Mines and Petroleum has already begun issuing leases and drilling rights for tracts off its western coast. EnCana, a Canadian energy company with over $30 billion in 2008 net revenues, recently announced the acquisition of one of these licenses, operated jointly with Nunaoil, Greenland's national oil company, making it the first foreign concern to get involved.
Other major oil companies are surely taking notice of this opportunity, especially at a time when countries like Russia and Venezuela are squeezing foreign operators. With this state of affairs, who's to say how many billions in extra revenue may soon be filling Greenland's coffers.
Global Warming As A Good Thing?
Of late, the waters off of Greenland's coasts have been free of ice for longer and longer periods throughout the year. This means that previously inaccessible waterways can now be worked for up to five months out of the year, according to the U.S. Energy Information Administration. Similar melting has been witnessed off the northeastern coast.
This is all part of a general warming trend; the American Geophysical Union estimates that because of climate change, temperatures will rise in Greenland 2.2 times faster than in the rest of the world.
For good reason, global anxieties about climate change have risen to crisis levels, and fears about rising sea levels are at the top of the worry list. The melting of the Greenland Ice Shelf and sea ice poses a considerable threat to global sea levels. But while many fret and fume about the fate of Micronesian islets, Venice, and the Louisiana coastline, quite a few Greenlanders may be understandably excited at the prospects of controlling the single largest new energy reserves in recent history.
Greenland, Tomorrow's Dubai
Just like the Gulf States boomed after striking oil – think of Dubai, home to the world's tallest building and only seven-star hotel – Greenland may soon see rapid development, paid with hydrocarbon earnings.
With such a sparse population, even a few billion could mean a substantial increase in living standards. It would provide more jobs, public money for infrastructure projects, and maybe even a system of citizen subsidies similar to those in Saudi Arabia and Kuwait. If oil windfalls exceed immediate needs, Greenland may even be in a position to set up a rainy-day fund like the vaunted Norwegian Oil Fund.
References:
US Geological Survey for East Greenland Rift Basins Province and West Greenland-East Canada Province
Greenland opens to oil firms; melting ice unlocks reserves - International Herald Tribune
