China and Iceland to jointly explore Arctic

Chinese oil major CNOOC has reportedly reached an agreement with Iceland’s oil company Eykon Energy to jointly explore and produce oil and gas in the country’s Arctic waters, in the Dreki Area.

The partnership was a pre-requisite for Eykon, who applied for a license in the area last year but asked authorities for more time find an additional participant.

Eykon applied for a license in the area last year, but has asked the authorities to be given more time to find an additional participant.

Once the deal is official, CNOOC will be the largest operator in the area so far., according to local newspaper Vidskiptabladid, with an 80 per cent stake. The remaining 20 per cent will fall to Eykon.

Orkustofnun, the Iceland’s National Energy Authority, has given Eykon until July 1 to complete the negotiations with “interested parties”, after which the authority will take the application for final processing.

The Dreki area covers 42,700 square kilometers. Water depths range mostly from 800-2000 meters, which is well within the reach of currently available and tested technology for undersea oil drilling.

The Dreki Area is part of the Jan Mayen Ridge micro-continent, which was separated from the continental shelf of Greenland and Norway by plate tectonic movements 45-60 million years ago.

Seismic surveys and other geophysical measurements indicate that oil and gas can be found in the Dreki Area, as they are in adjacent and geologically similar areas.