Mikkelsen A., Langhelle O. (eds.) Arctic Oil and Gas. Sustanability at Risk?

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water as well as water produced from petroleum production are typically handled

by membrane separation in his research. The development of a biomembrane

for agriculture, with possibilities for controlling the water content, adjusting

the soil temperature and reducing CO

emission, is presently a central research

activity.

Bjørn-Tore Blindheim is a Ph.D. student in management at the Department of

Media, Culture and Social Science, University of Stavanger, Norway. His main

research area is corporate social responsibility. He attained a Masters degree in

Political Science from the University of Oslo in 2000.

Ronald D. Camp II, Ph.D., is Associate Professor in International

Business/Organizational Behaviour in the Faculty of Business Administration at

the University of Regina, in Saskatchewan, Canada.

Leo-Paul Dana is Senior Advisor to the World Association for Small and

Medium Enterprises, and tenured at the University of Canterbury, in

New Zealand. He was formerly Deputy Director of the International Business

M.B.A. Programme at Singapore’s Nanyang Business School. He also served on

the faculties of McGill University and INSEAD. He holds B.A. and M.B.A.

degrees from McGill University, and a Ph.D. from the Ecole des Hautes Etudes

Commercials. He is the author of several books in business and economics.

Sharman Haley is a Professor of Economics and Public Policy employed by the

Institute of Social and Economic Research at the University of Alaska, Anchorage,

USA. She attained a Ph.D. in Economics from the University of California,

Berkeley, in 1994. Her focus area is interdisciplinary social science research on

community and resource development in rural Alaska and the circumpolar Arctic.

Ketil Fred Hansen is a post-doctoral scholar at the Department of Media,

Culture and Social Science, University of Stavanger, Norway. His main research

interests are the development–security nexus, including issues of aid, poverty,

marginalized groups, human rights and security. His international publications

include ‘Cutting aid to promote peace and democracy? Intentions and effective-

ness of aid sanctions’ in The European Journal of Development Research 2006

and ‘The politics of personal relations’ in Africa (Edinburgh University Press),

Vol. 73, no 2, 2003.

Ove Heitmann Hansen is a professional Strategy and Change Management

adviser at IBM Centre of Excellence for Oil & Gas and a Ph.D. student at the

University of Stavanger, Norway. He holds an M.Sc. in Industrial Economics,

a Masters degree in Change Management, a B.Sc. in Business and Information

Systems, and in Education from the Royal Norwegian Navy Academy. The

research fields at the University of Stavanger focus on stakeholder management

and decisions dilemmas in the oil and gas industry.

Valery A. Kryukov is a Doctor of Sciences (Economics), and Professor, Head

of the Research Laboratory ‘Economic Development of the West Siberia Oil

x Contributors

and Gas Complex’ at the Institute of Economics and Industrial Engineering,

Siberian Division of the Russian Academy of Sciences in Novosibirsk, Russia. He

is one of the leading specialists in Russia in the following areas: institutional

aspects of the oil and gas sector development (particularly concerning regional

issues); natural resources management (relating to regional socio-economic

development); regional project design and preparation of regional development

programmes.

Oluf Langhelle is a Professor in Social Sciences at the University of Stavanger,

Norway. He attained a Dr.Polit. in political science from the University of Oslo in

2000. His main research interests are sustainable development, environmental

policy, corporate social responsibility and negotiations within the World Trade

Organization. He has published several books and international papers on sustain-

able development.

Aldene Meis Mason is a Doctoral Candidate in Management at the University of

Canterbury, New Zealand, and a Lecturer with the Faculty of Business

Administration, University of Regina, Canada. Her interests are sustainable

indigenous entrepreneurship, resilience, capacity building, innovation and strate-

gic partnerships. After completing an interdisciplinary BSc. (Kin) and a MBA,

she held progressively more senior management and consulting positions in

industry and government for over 20 years. Aldene is a Director of the Canadian

Council on Small Business and Entrepreneurship. She is a Fellow of the Institute

of Certified Management Consultants and a Certified Human Resource

Professional.

Mette Ravn Midtgard is a Senior Researcher at NORUT (Northern Research

Institute in Tromsø), Norway. She was educated as an Economic Geographer at

the University of Oslo, and has worked as a researcher in Northern Norway for

over 12 years. In 2007 she started her Ph.D. fellowship at the University in

Tromsø focusing on recovery strategies subsequent to an oil potential spill.

Aslaug Mikkelsen is President of the University of Stavanger, Norway. She

moved from a position as Professor of Change Management at the same institu-

tion and a professor II position at the Western Norway Regional Health

Authorities, Stavanger. By education she has an M.Phil. in Sociology from the

University of Oslo and a Ph.D. in Work and Organizational Psychology from the

University of Bergen, Norway. Her main research areas are the management of

organizational change, knowledge transfer, occupational health and corporate

social responsibility. She has published several books and international papers in

her field.

Olaug Øygarden is a Masters student in Change Management at the University

of Stavanger, Norway, and has a Bachelors degree in Development Studies from

the University of Oslo. She has worked as a research assistant on this project, and

also on a project about corporate social responsibility in the textile industry.

Contributors xi

Preface

The Arctic contains huge amounts of oil and gas ready to be exploited. Is it possible

to exploit these resources in a sustainable manner? Several stakeholders have

expressed concern that exploration and production activities in these sensitive

areas may not be performed in an environmental sustainable manner nor be

consistent with the interests of indigenous peoples.

This book addresses these issues in the following way. In the first part of the

book, oil and gas are approached through the concepts of sustainable develop-

ment and corporate social responsibility together with the challenge of climate

change. The second part consists of case studies from Alaska, Canada, Norway

and Russia, where the discourses on oil and gas in the Arctic are explored. The

third part of the book draws together the material from the country studies in a

comparative manner.

The book is the result of a collaborative effort between scientists from Russia,

Norway, Canada and the United States. Together we travelled in 2005 and 2006

to remote places in Russia, Norway, Canada and Alaska with the purpose of

observing the physical environment, interviewing people as well as screening

literature, searching for effects from, and future challenges for, oil and gas activ-

ities in the fragile Arctic. It is our pleasure to extend gratitude to our colleagues

who agreed to participate in such a challenging project.

Stavanger 15 November, 2007

Professor Aslaug Mikkelsen Professor Oluf Langhelle

University of Stavanger University of Stavanger

Acknowledgements

The research on which this volume is based was supported by the Research

Council of Norway (175086/D15) and Shell International Exploration and

Production BV. Thanks are due to a number of people from Shell who enthusias-

tically supported the project with their time. In particular, Mr Robert Blaauw and

Dr James Parker initially asked us to design and carry out the studies on which

this book is based. Dr Parker helped guide the project through all its stages.

Mr Joppe Cramwinckel provided useful insights on industry approaches to

sustainable development. The manuscript also benefited from comments by

Dr Kim Cartwright and Ms Rebecca Nadel.

We gratefully acknowledge the assistance of all those who took the time to

comment on earlier drafts on sections of the manuscript, including Aleksander A.

Arbatov, Turid Arnegaard, Martin H. Belsky, Per Christian Brodschöll, Olga

Gjerald, Robert T. Hamilton, Lassi Heininen, James Meadowcroft, Richard Otis,

James Parker and Arild Aarskog. In addition, we would like to thank the individ-

ual authors of the chapters included in this book. Special thanks go to Sharman

Haley and Bob Anderson who have commented on most of these chapters.

We also extend thanks to Suzanne Sharp at the Institute of Social and Economic

Research (ISER), Anchorage, for facilitating the data collection in Alaska.

Likewise, we are grateful for assistance from Dr Vera Toskunina who, together

with Dr Elena Andreyeva, facilitated our second network meeting in Archangelsk.

We should also like to acknowledge Senior Advisor Solveig Andresen at the

Norwegian Petroleum Directorate for her contribution to data collection, discus-

sions and encouragement. Professor Gordon Pullar was an active contributor in the

first phase of this project and gave important contributions to the perspectives of

this project. The University of Stavanger (UiS) has supported this project through

involvement of staff as well as covering publishing expenses.

In addition, we would like to thank Clare Freeman for doing wonders with the

manuscripts, and Imran Shahnawaz, Keyword Project Manager, who handled

the production process for the book on behalf of James Rabson, Routledge. Last,

but not least, we would like to thank Rob Langham and Sarah Hastings at

Routledge for guiding us through the whole process.

A.M.

O.L.

1 Introduction

Aslaug Mikkelsen and Oluf Langhelle

We like to think of the Arctic as pristine, untouched nature, but the Arctic has

become part of the global economy. Large natural resources such as oil, minerals

and fish are already depleted from the region and sent to the global market. In the

modern Arctic, practically every aspect of life has been and continues to be influ-

enced and shaped by both developmental needs and market demands for natural

resources elsewhere. Simultaneously, the Arctic is suffering the consequences of

pollution and human-created global warming owing to carbon dioxide (CO

other gas emissions influencing the climate, and environmental damage and the

improper dismantling of military installations from the Cold War period.

On this background, the Arctic states (Canada, Denmark, Finland, Iceland, Norway,

the Russian Federation, Sweden and the United States) established the Arctic Council

in 1996, which focused on sustainable development from the very start. In the Ottawa

Declaration, they committed themselves to: ‘sustainable development in the Arctic

region, including economic and social development, improved health conditions and

cultural well-being’; ‘... the protection of the Arctic environment, including the health

of Arctic ecosystems, maintenance of biodiversity in the Arctic region and conserva-

tion and sustainable use of natural resources’; and ‘the well-being of the inhabitants

of the Arctic, including special recognition of the special relationship and unique

contributions to the Arctic of indigenous people and their communities’.

The programme of the Russian Federation chairmanship of the Arctic Council

in 2004–2006 states that the issues of social and economic development are

lagging behind in the Arctic Council activities compared to the environmental

component. The programme calls for the Arctic Council to take actions that will

create a more balanced contribution to resolving the problems of sustainable

development of the Arctic region. In 2006, Norway took over the chairmanship of

the Arctic Council. The new programme statement confirms that there has been a

greater emphasis on the environmental issues and that we now have a good

knowledge base on this. However, the programme focuses on the fact that it will

not be possible to maintain settlement patterns and to ensure growth and welfare in

the Arctic without further economic activities. The programme suggests that protec-

tion of the environment, combined with sustainable utilization of natural resources,

both renewable and non-renewable, should be the core areas of cooperation under

the auspices of the Arctic Council in the years ahead. This statement might be

seen as a door opener for further expansion of exploration and production of oil

and gas in the area in line with worldwide oil dependency and for the economic,

geopolitical and developmental interests of the main Arctic states, in spite of the

vulnerability of the area.

The presence of hydrocarbons in the Arctic has already caused large-scale

developments in the Arctic, such as: in the Alpine and Prudhoe Bay at the North

Slope, Alaska; in the North West territories, Nunavut and Nunavik in Canada; at

Melkøya in the Northern Norway; and in the Yamalo-Nenets and Khantyt-Mansii

Autonomous Okrugs in Russia. The fact that there are few signals of a decline in

either the demand for oil and gas, or for security of the energy supply has become

one of the top political issues in the European Union (EU), the United States (US)

and other nations in recent years, creating an expectation of a further expansion

of oil and gas activities worldwide.

For many years, the International Energy Agency (IEA) has systematically over-

estimated how much new oil will come out on the market outside the Organization

of the Petroleum Exporting Countries (OPEC).

Most oil reserves are found in

only a few countries, but estimates of their size vary widely. The most available

and economical oil and gas fields in the world are already exploited. The main

future oil and gas fields are situated in remote areas with vulnerable environments,

where the costs of exploration and production are high, or within politically unstable

countries. In contrast to the other areas, most Arctic countries are politically stable,

but from a developmental perspective, there is uncertainty surrounding the

requirements of technology that is currently (2008) undeveloped or untested.

The US geological survey (USGS) world petroleum assesment 2000 estimates,

that approximately 25 per cent of the undiscovered petroleum reserves are in the

Arctic, makes Arctic oil and gas an important economic and geopolitical issue.

Map 1.1 shows assessed Arctic oil and gas provinces and potential Arctic oil and

gas provinces. The yellow areas constitute the areas where USGS estimates that as

much as 25 per cent of the world’s remaining undiscovered conventional oil and gas

fields may be found. The areas marked in blue are some other potential Arctic areas.

In addition to the four countries with operating fields today, Alaska/US, Canada,

Norway, Russia, Greenland/Denmark may also have huge oil and gas reserves.

Figure 1.1 presents the volume of the undiscovered resources in the

Arctic presented by the USGS 2000 assessment.

The total estimate for the world

is 268 billion Sm

o.e., or 1690 billion barrels o.e. of the 70 billion Sm

that is

stipulated to be in the Arctic. The major reserves seem to be in Western Siberia

on land, North Slope of Alaska offshore and East Greenland offshore. There has

been no exploration in East Greenland: only a few seismic lines have been

acquired, basically due to year-round sea-ice cover. Explorations conducted in

West Greenland for several years have made no exploitable discoveries. The

USGS estimates for the Lofoten area in Norway, which is equivalent to the

Norwegian Sea area, are considerably higher than the Norwegian Petroleum

Directorate’s estimate.

This shows that there is considerable uncertainty regarding how big the Arctic

reserves are, which the USGS has also confirmed. In fact, the estimate included

2 Aslaug Mikkelsen and Oluf Langhelle

Introduction 3

4,0

0,9

12,0

1,3

0,9

2,5

8,2

4,6

1,8

18,2

1,5

7,1

4,7

2,3

8,6

2,7

30,2

2,7

7,9

7,1

10,4

North Slope of Alaska

East Siberia

West Siberia

Timan-Pechora

Barents Sea (Eastern Partl)

Vestfjorden-Helgeland

East Greenland

Oil & LNG

30 billion Sm

(187 billion

barrels)

Gas

40 thousand billion Sm

(1415 TCF)

Total

70 billion Sm

o.e. (440 billion

barrels o.e.)

0,4

0,8

1,2

0,4

NPD estimate

Figure 1.1 The Arctic’s undiscovered oil and gas resources. Source: The USGS World

Assessment 2000.

Map 1.1 Assessed Arctic oil and gas provinces, and potential Arctic oil and gas provinces.

Source: The USGS World Assessment 2000.

4 Aslaug Mikkelsen and Oluf Langhelle

areas which lie entirely south of the Arctic Circle. If the East Siberian basin is

deducted from the 25 per cent, the number is closer to 14 per cent (Bailey, 2007).

Currently, USGS is undertaking a study of several of these basin areas and will

publish a new estimate later in 2008.

The challenges of Arctic oil and gas

This book is about the expansion of the oil and gas activities in the Arctic. Our

focus is on Alaska, Canada, Norway and Russia, where the current and near-

future oil and gas activities in the Arctic will be located. The expansion of oil and

gas activities in the Arctic poses tremendous challenges. We believe, however,

that many of the current and potential future conflicts in the Arctic can be

addressed in a meaningful way within the framework of sustainable development.

In this book, therefore, the overall question is what sustainable development

entails and what it might imply for oil and gas activities in the Arctic. Will the

desire for economic progress in both developing and developed countries put the

sustainability of the Arctic, as well as the globe, at risk? The answers to the ques-

tion are neither straightforward, as they depend upon a number of factors and

additional information, nor are the challenges identical in different regions/coun-

tries in the Arctic.

This study is structured along three steps to answer the research question: The

first step is to provide an initial understanding of the concept of sustainable devel-

opment. Our approach places sustainable development within the processes of the

United Nations Conference on Environment and Development (UNCED) and of

the report from the World Commission on Environment and Development

(WCED), Our Common Future (1987). Sustainable development is an ethical

development goal that frames some global issues in a particular way and defines

a global sustainability agenda in which the prominent issues are, among others,

developmental concerns, climate change, biodiversity and indigenous peoples

(Langhelle, 2000).

Although Our Common Future and the following UNCED process barely

mention the Arctic, it is from these international processes that the concept of

sustainable development was placed – and has further evolved – on the international

political agenda (Lafferty and Langhelle, 1999). It is also from these processes that

sustainable development has been transferred to the Arctic context, primarily

through the auspices of the Arctic Council. The questions we attempt to answer are:

– how do the Arctic Council and its Working Groups understand the concept of

sustainable development?

– what are the implications drawn from sustainable development for oil and gas

in the Arctic? and

– how are the challenges from oil and gas conceived in the Arctic?

The second step is to focus upon the responsibilities of the oil and gas industry

to address challenges of sustainable development in the Arctic. This is done

Introduction 5

theoretically by exploring the nature of the concept of corporate social responsi-

bility (CSR), and by discussing the potential relationship between CSR and

sustainable development. Most basically, business has an economic responsibility

towards society, that is, to enhance value for shareholders, employees, local

communities and society in general. However, business also has an institutional

responsibility towards society, that is, to comply with both national and interna-

tional laws and regulations, and politically sanctioned standards and guidelines

aimed at promoting responsible business practice. Both Arctic public policy

documents, and international standards and guidelines aimed at promoting

responsible business practice in general, suggests that the oil and gas industry

should support the goals of sustainable development through their decisions and

actions. They should take into consideration not only the economic aspects of

their operations, but also the social and environmental issues.

Alongside national governments and supranational bodies such as the EU,

the multinational oil and gas companies are the main actors in the competition

to gain control over the Arctic region’s natural resources. Although the oil and

gas companies have financial power, they are dependent on access to oil and

gas reserves and licenses to operate in order to satisfy their stockholders’ present

and future targets for value creation. Managers have been willing to fake the

size of the available reserves

to prevent negative development in shareholder

values.

Oil and gas companies seem to adjust their behaviour and definitions of

corporate social responsibility in response to unexpected criticism of their

activities by the media and non-governmental organizations (NGOs). When these

activities develop into critical incidents and become the sustained focus of

public attention, they also attract the attention of corporate management and

can influence their strategic decisions, corporate activities and institutional

transformation (Flanagan, 1954; Dutton and Dukerich, 1991; Hoffman and

Ocasio, 2001), as well as a collective definition or redefinition of social problems

(Pride, 1995). How vulnerable the same companies are to damage to their

reputation is illustrated by such critical incidents as the Brent Spar, the Ken Saro

Wiwa execution in Nigeria and the Exxon Valdez accident (Mikkelsen, Engen and

Grønhaug, 2008).

The third step is to map out and analyse the main disputes and conflicts within

and between different Arctic regions/countries – in our case, Alaska, Canada,

Norway and Russia – from a discourse perspective. How do stakeholders in the

oil and gas industry perceive and frame the expansion of oil and gas activities in

the Arctic? What are the main conflicts? How do these conflicts eventually relate

to ideas about sustainable development and corporate social responsibility?

How disputed are Arctic oil and gas activities, and what are the main concerns of –

and conflicts between – indigenous peoples, local people, governments and oil

and gas companies? Can the interests of these different groups be reconciled and

combined with an expansion of oil and gas activities? Or do some stakeholders

perceive sustainable development in the Arctic to be at risk from further expan-

sion of oil and gas activities? And finally, what are the managerial implications