Greenland's capital of Nuuk (pop. 15,000) was turned upside down by the arrival on May 11 of U.S. Secretary of State Hillary Clinton. She was there for a meeting of the Arctic Council, an eight-nation group that's trying to figure out how to manage the region's growing industrial activity while protecting the ecosystem and native rights.
Greenland's role as host of the meeting highlights its growing importance in the drive to exploit the riches of the Far North. Cairn Energy, a Scottish explorer of oil, just received approval from Greenland authorities to drill four exploratory wells in the chilly waters west of the island. Last year, Cairn drilled two wells that uncovered evidence of oil and gas in the same area the company plans to probe more extensively starting in early June. Oil majors Royal Dutch Shell (RDS.A) and ExxonMobil (XOM) have expressed interest in Greenland as well.
Geologists have long known that oil, iron ore, zinc, nickel, and diamonds were likely to be found in Greenland. Now oil is well over $60 a barrel, the threshold price for making Arctic drilling profitable. Receding sea ice, meanwhile, has lengthened the drilling season. And mineral deposits, including zinc, have been uncovered as the inland ice recedes.
While Greenland, a Danish colony for almost 300 years, was granted home rule in 1979 and broader domestic governance in 2009, it still relies on an annual subsidy from Denmark of about $674 million, or 30 percent of the economy. With the hope of an oil bonanza, "there's a stronger belief that we can free ourselves from Denmark's economic and political domination," says Greenland's Prime Minister, Kuupik Kleist.
The numbers, in theory at least, are alluring. Greenland's waters may hold 48 billion barrels of oil equivalent, the U.S. Geological Survey estimates, almost double 2009 U.S. oil reserves. The Citronen Fjord zinc deposit may be one of the world's biggest, according to Greenland's Bureau of Minerals and Petroleum. London Mining is investing $2 billion in an iron ore project north of Nuuk.
An unsettling aspect of Greenland's development is the role of global warming. The annual temperature increase in the Arctic since 1980 has been twice as high as in the rest of the world. That means the Arctic Ocean may be largely ice-free during the summer by 2050, according to the Arctic Monitoring and Assessment Program, an international environmental group. For now, the Greenlanders are being practical: The melting makes it easier for miners and drillers to do their work. And the island may be able to generate more revenue from shipping as once-impassable routes open up, says Kleist.
The bottom line: With up to 48 billion barrels of oil equivalent, Greenland may prove to be a critical player in the race to develop the Arctic.