Geologists believe that deep beneath the Arctic seas lie untapped reserves of oil and gas. These icy waters are among the world’s most treacherous and the source of the iceberg that sank the Titanic in 1912. With temperatures plunging below -30C in winter and immersed in total darkness for months at a time, it is hard to imagine a more hostile environment.

These days, however, it is not just huge icebergs that loom large on the horizon, but the powerful forces of Big Oil. With oil prices close to $100 a barrel, the economics of such high-risk and technically difficult ventures are beginning to look attractive.

ExxonMobil, the world’s largest oil company, and Chevron of the US, Husky and Encana of Canada, Dong of Denmark and the UK’s Cairn Energy are among those that have either already won or applied for exploration licences from Greenland’s Bureau of Minerals and Petroleum for acreage.

“We’re [10-15] years from realising the area’s potential [but] it looks like an excellent offshore opportunity,” said Graham White, a spokesman for Husky Energy, which this summer started prospecting for oil on two large blocks more than 100 km offshore of Disko Bay, off the northwest coast near Greenland’s tiny capital of Nuuk.

“Greenland is one of the last places in the world where it is possible to make a big oil play free of the kind of political risks you face in the Middle East, Russia or Africa,” said an official at another company active in Greenland. “The discoveries could be huge – but the truth is nobody really knows just yet.”

Estimates from the US Geological Survey are certainly promising. It has claimed that just one area offshore of eastern Greenland could contain more than 110 billion of barrels of oil – about 42 per cent of Saudi Arabia's reserves, so it is no surprise that a host of companies are eager to get involved.

Exploration in the Disko Bay area and another further to the south is the farthest advanced. A series of licences were awarded earlier this year and seismic and aerial evaluation has already begun. If successful, exploratory drilling could begin in a year or two’s time.

Another area off the shores of Jamesonland in eastern Greenland is also attracting interest, although it is at an earlier stage.

Greenland remains a relatively unexplored area. In total, there have been just six wells drilled, one in 2000 and the rest during the period of sustained high oil prices in the 1970s.

These were inconclusive but Hans-Christian Langager, senior consultant at the Danish Energy Authority, said that there was much more work to be done to clarify the area’s potential. He agreed that Greenland’s oil potential could be huge but urged caution.

“More areas will be opened in time,” he said, “although there is a 25 per cent chance there is no oil at all.”

It is not just high crude prices and the scarcity of easy-to-find oil elsewhere that is driving development.

Many of the island’s 57,000 residents are eager to find ways to finance their independence from Denmark, which currently supplies €395 million (£290 million) in grants every year – a big chunk of Greenland’s €1.3 billion GDP. The discovery of oil and mineral wealth would raise the prospect of a transformation in the country’s tiny economy, which still relies chiefly on fishing.

Of course, for environmentalists all of this represents a nightmare. Greenland, the largest island in the world, is a fragile habitat for polar bears, whales, walruses and seabirds.

“An oil spill could be catastrophic,” said Tarjei Haaland, energy and environment campaigner for Greenpeace Nordic in Copenhagen. “It’s the most sensitive area in the world to explore for oil. There’s always a risk an accident will happen.”

Ironically perhaps, the earth’s warming climate is a positive advantage for oil companies. “It is a lot easier now because of global warming,” says Jørn Skov Nielsen, deputy minister of Greenland’s Bureau of Minerals and Petroleum. “There’s a lot less sea ice now then eight or ten years ago.”

Nevertheless, just as in similar areas such as the Russian Arctic, where similar projects are under way in the Shtokman sea in the Arctic circle and the Yamal peninsula in Northern Siberia, prospecting remains challenging and expensive.

With a window of just a few months a year and in extreme cold, it also presents unusual challenges.

Icebergs, for example, need to be tracked by satellite and helicopter and if necessary towed away by support ships. The current run of high oil prices makes all this economically feasible. While there is no guarantee the high prices will continue, as long as they do Greenland’s rush for oil is set to roll on.

Battling the elements

— Before oil companies can begin to tap the Arctic’s oil and gas reserves they must first overcome one of the world’s harshest environments
— During winter packed ice lies offshore and icebergs can endanger rig operations all year round
— The companies will use satellites, helicopters and radar to monitor icebergs
— When Denmark’s Dong Energy last drilled off Greenland in 2000, it had to mobilise its support ships to tow an iceberg away before it collided with a rig
— Rigs might have to be shut down and staff moved. The extreme cold and darkness during winter means initial survey work will have to be undertaken during a short summer window

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