[Scott] Up next on "Energy Switch," we look at the Arctic and its abundant energy.

- So in Alaska, at one point, about 80% of its general fund revenue was coming from oil.

Now it's about 1/3.

- Eighty percent.

- However, it's not universally accepted that new oil development's a good thing.

First of all, you're gonna have to find very big oil fields and gas fields to justify it.

And then, the ice becomes really a major factor.

- Yeah, sure.

- When we talk about offshore, you need to build something that is so much stronger than what's been done before.

Second challenge unique to the oil industry is, what do you do if there is an oil spill?

- Overall in the Arctic, the largest renewable is hydro.

But also, now they're looking at tidal energy, and geothermal's getting entered into the system.

- And there is an increased drive to have solar, wind, a combination of that.

- How about nuclear?

Could it work in the Arctic?

- Why asking about could?

It does work in there.

[Scott chuckles] [Scott] Coming up, oil, gas and geopolitics, geothermal and nuclear, melting ice and permafrost in the Arctic.

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[upbeat music] - I'm Scott Tinker, and I'm an energy scientist.

I work in the field, lead research, speak around the world, write articles, and make films about energy.

This show brings together leading experts on vital topics in energy and climate.

They may have different perspectives, but my goal is to learn, and illuminate, and bring diverging views together towards solutions.

Welcome to the "Energy Switch."

The Arctic produces 10% of the world's oil and 25% of our gas, but it's hard to get through cold, dark winters in dangerous conditions.

It provides export income to Arctic nations, but new production may be overly expensive, while residents are wary of environmental impacts.

They're looking to hydro, geothermal, wind, even nuclear, and solar for electricity, while dealing with melting sea ice, coastal erosion, and thawing permafrost, We'll discuss with Mark Myers.

He's the commissioner for the U.S.

Arctic Research Commission, former director of the U.S.

Geological Survey, and former vice chancellor at the University of Alaska Fairbanks.

Sergey Vakulenko is a senior fellow at the Carnegie Russia Eurasia Center, and the former head of strategy and innovation at Gazprom Neft, Russia's third largest oil company.

Coming up on "Energy Switch," an eye-opening episode on Arctic energy.

Well, welcome.

Really glad you're here, Mark, Sergey.

Sergey, why should our viewers care about Arctic and the Arctic energy?

- Energy resources have been explored almost all over the world, and many of them have been already exhausted and depleted.

And that's where many geologists and company strategists think as the last untapped resource.

- Interesting.

What do you add to that, Mark?

- Well, it is a significant part of the global energy supply.

About 10% of oil, about 25% of natural gas produced in the world comes from the Arctic.

- Already?

- Already.

The undiscovered resource base is estimated to be about 13% of the world's oil, additional, that's yet to be discovered, and 30% of the natural gas.

But in addition to that, the Arctic is an area of significant advancements in renewable energy.

- Yes, the full gamut.

What do we mean when we say Arctic?

What is it?

- Well, there are Arctic nations, and all of them produce energy, all of them use energy into very different ways.

On your map over there, you show the Arctic Circle.

But if you think of energy, generally they carry it further south into the Arctic Oceans, into the seas that approach the Arctic.

It's also important to look at the Arctic in sense of it's an ocean in the middle and land surrounding it on the sides.

Versus Antarctica, which is a land in the middle and ocean surrounding it.

So, it is really a place where nations come together.

And nations need to work together, but sometimes there's geopolitical competition within that.

- Interesting.

- And, in fact, this race for Arctic is about 100 years old.

It started in 1890s.

It was huge, wide wilderness.

Nobody knew yet about the oil riches in there, but back then already, people were trying to claim as much of Arctic as possible.

- How important is Arctic oil globally?

- If you look at Russia, you look at the United States, you look at Norway, it's been incredibly important to the economies of these regions.

And it's an export commodity.

Most of the Alaska oil goes to California.

Russian oil goes to many, many different places, as Norwegian oil is a primary export to the European market.

- It brought development, it brought money to all these regions.

If we're talking about Russian North, for example, that was the domain of reindeer herders.

So, it's a very empty place.

And then, suddenly, you get a huge influx of trucks, tractors, drilling rigs, oil workers, and so on, which both bring wealth, but at the same time, they do bring destruction of the traditional habitat, and they do bring, well, quite substantial changes in the way life going on there.

- Cultural?

- Indeed.

And Soviet Union have built cities out there, not even towns, in places with year average temperature of minus 10.

- So in Alaska, at one point, about 80% of its general fund revenue was coming from oil.

Now it's about 1/3.

- Eighty percent.

- About a 1/3 now.

Created a heritage fund for Alaska called the Permanent Fund, which has about $88 billion in it, pays a dividend each year of about $1,000 to the residents.

So, it's significant to the societal base.

However, it's not universally accepted that new oil development's a good thing.

A seminal event was Exxon Valdez's oil spill.

That changed a lot of attitudes to oil and gas, because it was a major environmental disaster.

Since then, they've tightened up the laws, required double hull tankers, escort vessels.

But still, those concerns remain anytime you put oil on water in the Arctic.

- As we look offshore production in the Arctic, what do we see coming?

- Okay, when we talk about offshore, you have to build it to withstand wind and wave pressure.

If you have ice and ice load, it's order of magnitude stronger.

So you need to build something that is so much stronger, so much more resistful than what's been done before.

That's the first challenge.

Second challenge unique to the oil industry is, what do you do if there is an oil spill?

If you have an oil spill in the Arctic in winter, you have the oil flowing under ice.

And also, if you have extremely cold temperatures, many materials behave in a very different way.

Steel becomes brittle, for example.

All the rubber gaskets behave in different ways and so on.

So, that are the things that need to be overcome.

And the latest element is the supply.

Offshore oil developments, they depend quite a lot on supply ships, supply flights.

And if you are in the middle of polar night and inclement weather, this also becomes difficult, so this turns into logistical problem.

None of this insurmountable, but it does add to cost.

- Sure.

I mean, given these challenges, is the potential worth it?

- First of all, you're gonna have to find very big oil fields and gas fields to justify it.

And then, the ice becomes really a major factor.

The ice isn't just simply pack ice or floating ice.

Against the shore, it's land fast.

As you move out next, it's in a shear zone, so it shears really difficult in huge amount of pressure.

And then, once you get further offshore, in the winter it freezes up, but then you have the big iceberg issues and the icebergs moving through.

The challenge also is you're really limited to seasonal drilling and exploration, and you have to bring all the logistics with you.

And then finally, you have to have a terminal at some point.

So, if you're offshore in serious ice conditions, you would need something like the Yamal structures or you need to bring a pipeline onshore, and then bring it to like in Alaska, maybe to the Trans-Alaska Pipeline.

So, you have to bury that pipeline really deeply because of the ice gouges.

- So I mean, if I'm a listener, I'm thinking, "Why the hell would we do any of this?"

You know what I mean?

[laughs] Is the upside there though?

- The upside's there in terms of the size of the potential fields.

Now, whether or not it's politically acceptable to do it varies by administration.

Because that's the other problem is a lot of upfront capital, exploration risk.

But then, it's gonna take you a decade or more to develop it.

- Yeah, sure.

- Then you start to think, "Hmm, oil era is probably going to come to an end."

Maybe not in 10 or 15 years, but 30, maybe.

Would I be able to recoup my money before that or not?

- Is the Arctic warming and permafrost thawing, and is this opening up more shipping lanes?

- Yes.

Yes.

And it's also changing the environmental conditions in which you operate.

So, sometimes, particularly with respect to permafrost, it's leading to a lotta coastal erosion.

Sea ice disappears, wave energy increases.

The shoreline that's held together and glued together by the permafrost collapses.

Coastal storms are increasing as the ocean warms.

We're seeing the typhoons coming up into the Arctic now.

We've recently had several villages heavily damaged by these events.

So, you're seeing a major climatic change and a shift in terms of the stability of the Arctic.

- Yeah.

- Probably in Alaska as well, but quite a lot in Russia has been built on permafrost.

West Siberia is one huge swamp.

It's absolutely inevitable in the summer.

You want to drill something, you need to build a well pad first, and you do it with a lot of sand.

You want to bring in lots of equipment.

Well, how you do it?

They build winter ice roads.

And during those winter months when this ice and snow turns into something that's probably stronger than concrete, there are constant convoys of trucks bringing all kind of supplies, equipments, and so on that will be later used in the summer to drill, build, and so on.

But for that, they are dependent on the cold season being long enough, and it's been shortening.

So, now they're building four, five, six lane winter road where there used to be three.

Another situation is, in the summer, any vibration makes permafrost to melt.

You can see the foundations of the building being warped and so on, so all over Russian Arctic, at least, you see quite a lot of heat pumps.

They're actually not heat pumps, they're cold pumps to cool down permafrost for lengthening and warming summers.

And when you're talking about climate change, the polar and sub-polar zones are heating up much faster than other parts of the globe.

So, it is a challenge that's already felt.

- Yeah, adding to that, now there's not enough time in a single season to both drill and test.

So, you got to move all that equipment off the site, plug the well back, and then come back in a second season if you're successful on the exploration just to test it.

So, your exploration capital is significantly more and your risk is significantly more.

So, these changes are very, very significant.

- So let's talk about natural gas in the Arctic.

Production certainly there and potentially growing.

How do we move it out of the Arctic to where it's needed in the world?

- Well, out of the Norwegian, it's largely LNG.

Out of Russia, it's significantly pipelines, but LNG as well.

In Alaska right now, we're not currently exporting, but they're trying to build a 800-mile pipeline down to ice-free waters in Southern Alaska, liquefy, and ship it to Japanese markets.

- Okay, so we're building big LNG facilities to move natural gas out of the Arctic?

- Hold the train.

- Okay.

- 'Cause gas in Russia, particularly on Yamal Peninsula and around Yamal Peninsula, that's gas equivalent of Persian Gulf for oil.

- Wow, okay.

- Huge amount.

And it has been developing since '60s, and there was a nice cooperation between Soviet Union back then, Russia later, and Western Europe.

And there were multi-scale pipelines built across Russia, Ukraine, Belarus to Europe.

And that was working nicely until the war.

So that flow has stopped.

Russia is now trying negotiating with China to build pipelines to China because for now, at least, that vast gas resource is stranded.

It still goes to supply Russian economy.

Russia was exporting something like 1/4 for all its gas it was producing.

Russia's one of the largest consumers of gas globally.

But when we're talking about exports, that's an interesting situation how politics mixes with economics, technology and so on.

- These are huge facilities, these LNG facilities.

And those work in the permafrost regions?

- When you make LNG, what do you do?

You take methane and cool it from ambient temperature to minus 160 degrees.

If you do it in Qatar or in the Gulf Coast, where it's what, plus 40 centigrade?

Plus 60 sometimes, and you need to bring it down to minus 60.

Compare it to Yamal, when for long part of the year, ambient temperature is minus 30 centigrade, right?

So, it actually has a natural advantage.

- But the infrastructure itself is stable?

- What they're doing now is build a relatively large facility on some sort of a barge in Murmansk, then they tow it all the way to Yamal, and then in the shore zone, they sink it and fix it to the sea floor with gravity.

- Let's talk about electricity a little bit.

How do people in the Arctic and industry in the Arctic get electricity?

- If it's oil, at least in Russia, the way it goes, usually there's quite a lot of associated gas produced alongside with oil.

They actually have abundance of energy, rather than lack of it.

So, they have either a piston gas power plant, a turbine gas power plant.

- Is that similar in Alaska and Canada and the other regions?

- Yeah, they generally use natural gas for electrical generation and also to run compressors and pumps, and et cetera.

- Do we use diesel for electricity generation too, or?

- Generally not.

But they have topping plants in the fields to create it for the vehicles and to run certain generators and remote equipment where they're not using gas, where they don't have a gas pipeline.

- What do they use for backup generators or, you know, UPS, uninterrupted power supplies?

If it's not diesel, what are they using?

- Diesel.

- Diesel.

[laughs] Okay.

- Additional type of generators.

But because of that there is an increased drive to have solar, wind, a combination of that.

'Cause in other places when you calculate whether your wind and solar is economically competitive, you compare it with rather low costs and combined cycle power, gas power plant, something like that.

And then, without subsidies, solar and wind might not fly.

But in there, it's quite often quite windy areas.

And B, every kilowatt you generate on your wind turbine or on your solar panel saves you, well, another liter of diesel, something like that.

And because diesel is so much more expensive, that's usually very economical.

- Right.

We talk about wind and solar and hydro, we all often lump them together, you know?

But they're very different.

What do we see in the Arctic, Sergey?

- Wind almost everywhere.

It's very flat.

Quite often it's coastal regions.

Quite often, the challenge is that the wind is too strong, so you have to slow your turbines down and make the pylon stronger.

Land is cheap.

There's no people complaining about, well, destruction of beautiful landscapes and all that.

So, wind seems to be an attractive resource.

Question is how to capture it and how to bring the power that's being generated on those wind turbines to the markets.

Solar, these are higher latitudes.

So there's not so much solar potential in there.

- Overall in the Arctic, the largest renewable is hydro.

In Alaska, hydro is by far the largest renewable.

It's the same... You've looked at Norway?

- Uh-huh.

- Far the most renewable.

Greenland.

And a significant amount of energy in Canada.

- Great topography, a lotta rainfall.

- Well, a lotta rivers.

A lot of big rivers.

- Gravity works.

- Yeah, and so one of the challenges with the hydro is you change the ecosystem.

The Arctic streams generally have anadromous fish, fish that come up and they spawn in the river and there's a food supply for people living in those communities.

- However, what's happening now is they're looking at run of river systems.

Smaller scale, but in the river, and they can build turbines and systems, that a fish-- almost like a fish wheel, but don't disturb the fish too much.

- No dam?

- No dam.

- Just putting turbines right in the water?

- It's actually using the natural waterfall.

So, hydro is a real good tool at the right scale.

But also, now they're looking at tidal energy, and geothermal's getting entered into the system where it's available.

And they're looking at the next generation geothermal, which is enhanced geothermal.

Iceland's starting to crack that nut in terms of what's called super critical.

And that is the immense amount of energy.

So, a lotta different tools are being used.

- How about nuclear?

Could it work in the Arctic?

- Why asking about could?

It does work in there.

Russia has a nuclear power station called Beloyarsk in Eastern Arctic.

They're thinking about building another one in Murmansk.

But also, what they're doing is usually to supply mining operations, they use pretty much the same platform that's been used for nuclear icebreakers.

And Russia has a few of those and building more.

But instead of using that reactor as a propulsion energy source for icebreaker, it's used to generate electricity and then supply it to shore.

And it's usually used for mining operations.

- Interesting.

- For example, you find a mining resource in there that could be mined out.

That deposit is going to run out in 15, 20 years, so it doesn't make sense to build a long-lasting power station in there.

So having a mobile power station that you can bring in there, use it while the mine needs it, when the mine closes, the power station moves somewhere else.

So, floating nuclear power station seems to be a sound solution for that.

- Has the Arctic got good potential for mining of critical metals, critical minerals, rare earth elements?

- Every Arctic country except for Iceland has potential for critical minerals and potential for rare earths.

I'll just use Alaska for example.

There are about six active big mines, they're mostly precious metals, gold and silver.

One is lead zinc.

It's the largest lead zinc mine in North America.

So that produces as a byproduct, a lotta waste.

That waste has rare earths in it.

If you look at the US critical minerals list, it's 60 minerals.

55 of them have been identified in deposits in Alaska alone.

And then if you go over and look at the Canadian shield rocks in the Eastern Canada, they're very prone to critical minerals.

If you look at the same rocks in Greenland, because the geology's connected, again, a high potential.

So we're seeing incredible potential for minerals, but many of these are in remote sites and they need energy.

- There's a lotta resistance to mining in the lower 48.

Do Alaskans, are they more open to mining?

- If the community is in closer proximity, so the jobs and the local taxes are going to be there for a community and the infrastructure will be supportive of the community, generally people are very supportive.

If they're down river from that same mine, they will not be.

We see within our indigenous communities a split.

Those communities that benefit significantly of the mining.

The Red Dog lead zinc mine is primarily on indigenous lands.

And the revenue for that is immense.

It's the largest source of shared revenue for indigenous.

It's more shared revenue than comes from oil and gas comes from them.

So it's highly variable.

- How about mining in Russia and other places, Sergey?

- If you look at there, the Northeastern Sweden, Northern Finland, that's the area where you, well, historically had traditionally quite rich iron deposits.

Finland, you would have nickel deposits in there, and also accompanying metals.

If you move further eastwards along the Arctic Coast, you hit what's called Norilsk Industrial District, and that's one of the largest producers of nickel, platinum, palladium, and like.

Nickel is also an important battery metal.

So, there's still quite a lot of potential to be tapped into.

- Sure.

How do you see it, the future of energy in the Arctic, at a real high level, Sergey?

- Either the world decides that oil era is coming to an end, and this probably means that Arab nations and major resource holders start to flood the market in attempt to monetize their oil and gas while there is still some demand for it.

If this happens, then probably prospects for Arctic energy is limited.

Or people decide that, well, energy transition is going to take time.

And if this is the case, then the interest in the Arctic source goes up.

Technology development helps.

Technology developments in shipping, for example, help as well.

And then, the Arctic probably is becoming a hot area for development.

- Interesting.

How do you see it, Mark?

- I'd watch Norway.

Norway continues to sell hydrocarbons, but they themselves convert more and more to renewable energies.

So, we are going to see, I believe, a shift in most of the Arctic to a much more renewable-based system and it'll be exporting your hydrocarbons in large part for the cash economy.

The currently producing countries that have significant oil and gas really are dependent on that revenue source.

So you'll see efforts to continue that as long as they can.

On the other hand, also recognizing the market time is finite.

- Interesting.

We got a big audience.

If you wanted to leave them with one or two final thoughts, what would it be?

- Vast energy resource.

Some technical challenges.

Something that could be a bone of contention politically amongst Arctic countries and an interesting place to watch.

- It can be a zone of collaboration or it can be a zone of extreme competition.

The Arctic energy supply is there.

The resources on the mineral side are there.

Just how much of that will be developed will be not just a energy question on supply, it'll be a question of geopolitics.

- Yeah.

Well, look, it's been a fascinating conversation.

I really appreciate your expertise and your thoughtful approach to it.

Scott Tinker, "Energy Switch."

Mark, thanks.

- Thanks, Scott.

- Thank you for being here, really.

Offshore oil production anywhere is difficult, and far harder in the Arctic.

All facilities must be stronger to withstand shifting ice or floating icebergs.

Oil spills under ice are very hard to manage.

Even producing oil on land, where average yearly temperatures could be below freezing, makes remote operations very difficult.

Though oil has boosted the Arctic economy, some are skeptical of new development.

It would take an enormous oil or gas field to make it worth the risk and great expense.

Today, most Arctic electricity comes from natural gas and diesel, but hydro and geothermal work well in some places.

Wind resources are good.

Solar works 24 hours in summer when sunny, but hardly at all in winter.

Russians have put nuclear reactors on barges, mostly to power abundant mining, while thawing permafrost makes everything challenging.

But huge energy resources and growing global demand make it likely that some countries, especially Russia, will continue to pursue Arctic energy.

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