The Arctic Region is one of the most important places we witness the impacts of climate change. Increasing temperatures are causing ice to melt, and the geography of the area is changing. With the help of the nuclear-powered ice breakers, new trade routes are establishing by the Russian government.
These new passages are now becoming popular for Chinese tankers and container ships that have to search for the shorter routes.
At the same time, the region has abundant oil and natural gas resources. According to the United States Geological Survey estimates, it consists of 13 percent of the world's undiscovered oil and natural gas sources. However, the data is from 2012, and it may not reflect reality. Up to now, many multinational companies have conducted exploration and established LNG facilities. International banks heavily financed these investments between 2016-2020.
According to the Banking on Climate Change 2020 report JPMorgan Chase, Citibank, and Deutsche Bank were the top three banks lending more than $1 billion for the last five years. Most of the remaining banks are also from the United States, Great Britain, and European countries.
However, starting from April 2020, we see that many of these banks stopped these investments by claiming that they will be committed not to finance the operations that will have a destructive impact on nature. In terms of these countries' climate policy approach, it was the obvious move for these banks, yet many of them decided to go this way after the collapse of oil prices in that period. After the election of Joe Biden, who had strict claims on climate policy, all American banks left financing drilling projects in the Arctic region.
According to studies, different parts of the Arctic region require different oil prices to become profitable. The most expensive areas require $80-85 per barrel. Therefore, declining oil prices in the first half of 2020 may have a role in Western banks' pro-climate stance.
Despite these Western banks' withdrawals, drilling projects in the Arctic continue to find support from other alternatives. Just a week ago, Rosneft's Arctic projects were funded by a Russian bank with a loan of $7 billion. As the largest country with undisputed lands, Russian investments will seem to continue in the upcoming years.
In the Yamal area, national oil and gas companies from China, Japan, South Korea, and multinational oil companies such as Total holds shares in Russian projects.
On the western border of Russia, a similar story is going on. Four major Swedish banks are continuing to support drilling operations in the Arctic, while the remaining are divesting from financing due to climate concerns. Today more than $1,2 billion of the Swedish banks' investments are financed for Arctic projects despite the government and public stance towards climate policies.
In Norway, the government continues to granting licenses for exploration in different regions of the Arctic. In November 2020, they issued 136 new licenses for additional exploration. Their success rate of finding new reserves is not as good as Russian companies, yet they are determined to expand their operations in the region. Meanwhile, Norwegian oil companies won a lawsuit against Greenpeace and other environmental organizations which accused them of violating human rights through the damaging environment.
Overall, even the most pro-environment countries' banks play or played an important role in financing hydrocarbon activities in the Arctic region, which is facing the damaging consequences of global warming. The profitability of these products and possible job creation opportunities continues to play a major role in these government's policies.
In the press release of the Norwegian Ministry of Petroleum and Energy, it states that drilling in the Arctic creates more than 200,000 jobs for the economy, and these operations will be supported for the resource management of the country.