8 February 2014 FM 2014/133

_______________ FM 2014/133 IASN-2013-093824

Greenland’s oil and mineral strategy 2014-2018

Appendices

Government of

Greenland

February 2014

2

Contents:

Appendix 1: Detailed description of Greenland's oil and gas strategy 2014-2018

Appendix 2: Oil and gas taxation model (government take)

Appendix 3: Detailed description of Greenland's mineral strategy 2014-2018

Appendix 4: Mineral taxation model (government take)

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DETAILED CONTENTS

APPENDIX 1 OIL/GAS STRATEGY FOR 2014-2018 ........................................................... 8

1.1 Knowledge – status and assessment of the current strategy ................................................. 8

1.2 New licence strategy objectives ................................................................................................. 10

1.2.1 Future licence policy ............................................................................................................................ 13

1.2.2.1 Onshore Disco & Nuussuaq Peninsula ............................................................................................. 14

1.2.2.2 Baffin Bay ......................................................................................................................................... 15

1.2.2.3 Davis Strait – Nuuk West – 63°-67°N ................................................................................................ 16

1.2.2.4 Open door area South-West Greenland ........................................................................................... 17

1.2.2.5 Open door area onshore Jameson Land ........................................................................................... 18

1.2.2.6 Licence strategy 2014-2018.............................................................................................................. 18

1.3 Environmental conditions in the proposed areas ................................................................... 19

1.3.1 Baffin Bay ............................................................................................................................................. 19

1.3.2 Offshore areas in the Davis Strait west of Nuuk .................................................................................. 20

1.3.3 Onshore area of Jameson Land ........................................................................................................... 22

1.3.4 Onshore area of the Nuussuaq Peninsula ........................................................................................... 23

1.3.5 Areas offshore South Greenland and South-West Greenland ............................................................ 23

1.4 Physical conditions in the proposed areas .............................................................................. 25

1.4.1 Baffin Bay ............................................................................................................................................. 27

1.4.2 Davis Strait ........................................................................................................................................... 28

1.4.3 South-West Greenland ........................................................................................................................ 28

1.4.4 Jameson Land ...................................................................................................................................... 28

1.4.5 Nuussuaq Peninsula............................................................................................................................. 29

1.5 Emergency response .................................................................................................................... 29

1.5.1 Oil spill response .................................................................................................................................. 29

1.6 Licence terms for the licensing round and the open door procedure ................................. 31

1.7 Licensing terms and conditions ................................................................................................. 32

1.7.1 Prequalification of operators ............................................................................................................... 32

1.7.2 Special licence terms and licensing terms and conditions for onshore areas ..................................... 33

1.8 Regulatory processing of licences and data ............................................................................ 34

1.9 Marketing of the oil/gas potential ............................................................................................... 35

1.10 Oil/gas scenarios ........................................................................................................................... 35

APPENDIX 2 OIL AND GAS TAXATION MODEL (GOVERNMENT TAKE) .............. 37

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2.1 Benchmark analysis of oil and gas tax models (government take) ..................................... 37

2.1.1 Base case of exploitation of a field ...................................................................................................... 37

2.1.2 Tax rules ............................................................................................................................................... 37

2.2 Comparison of effective tax and royalty rates etc................................................................... 38

2.3 Government take levels of other countries .............................................................................. 39

2.3.1 Corporate tax ....................................................................................................................................... 39

2.3.2 Diversity over simplicity or vice versa ................................................................................................. 40

2.3.3 Royalty – pros and cons ....................................................................................................................... 40

2.3.4 Who has successfully increased taxes? ............................................................................................... 40

2.3.5 State participation ............................................................................................................................... 41

2.3.6 Export duty and withholding tax on dividend ..................................................................................... 41

2.4 Analysis of Greenland's government take model .................................................................... 43

2.4.1 Corporate and withholding tax rates ................................................................................................... 43

2.4.2 Royalty ................................................................................................................................................. 43

2.4.3 Other taxes .......................................................................................................................................... 43

2.4.4 Export taxes ......................................................................................................................................... 44

2.4.5 State participation ............................................................................................................................... 44

2.4.6 Auctions ............................................................................................................................................... 44

2.4.7 Administration of control and collection of government take in Greenland ...................................... 45

2.5 Alternative Greenland models for consideration .................................................................... 45

2.5.1 Analysis of the different models .......................................................................................................... 47

2.5.2 Surplus royalty ..................................................................................................................................... 47

2.5.3 Effect of increased costs ...................................................................................................................... 53

2.6 Recommendation .......................................................................................................................... 55

APPENDIX 3 GREENLAND'S MINERAL STRATEGY 2014-18 .................................... 58

3.1 Knowledge – status and assessment ........................................................................................ 58

3.2 New focus areas ............................................................................................................................ 60

3.2.1 Global perspective ............................................................................................................................... 60

3.2.2 Iron alloy metals and base metals ....................................................................................................... 61

3.2.3 Critical minerals ................................................................................................................................... 62

3.2.4 Gold ..................................................................................................................................................... 64

3.2.5 Uranium ............................................................................................................................................... 64

3.3 Special conditions for North Greenland north of 81° N .......................................................... 65

3.4 Small-scale licences ..................................................................................................................... 66

3.5 Marketing activities ....................................................................................................................... 66

3.5.1 Scenarios for minerals ......................................................................................................................... 67

3.6 Licence policy and Greenland's minerals ................................................................................. 68

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APPENDIX 4 MINERAL TAXATION MODEL (GOVERNMENT TAKE) .............................. 71

4.1 Benchmark analysis for mineral taxation models (government take) ................................. 71

4.1.1 Base case of exploitation under an extraction licence ........................................................................ 71

4.1.2 Tax rules ............................................................................................................................................... 72

4.2 Iron ore ............................................................................................................................................ 74

4.2.1 Base case of exploitation of iron ore ................................................................................................... 74

4.2.2 Figure of government takes – iron ore ................................................................................................ 74

4.2.3 Level of government takes – iron ore .................................................................................................. 75

4.2.4 Corporate tax – iron ore ...................................................................................................................... 75

4.2.5 Diversity over simplicity or vice versa – iron ore ................................................................................. 75

4.2.6 Royalty – pros and cons – iron ore ...................................................................................................... 76

4.2.7 Withholding tax on dividends and interest – iron ore ......................................................................... 76

4.2.8 Comparison of government takes – iron ore ....................................................................................... 77

4.3 Gold.................................................................................................................................................. 78

4.3.1 Base case of exploitation of gold ......................................................................................................... 78

4.3.2 Figure of government takes – gold ...................................................................................................... 78

4.3.3 Level of government takes – gold........................................................................................................ 79

4.3.4 Corporate tax – gold ............................................................................................................................ 79

4.3.5 Diversity over simplicity or vice versa – gold ....................................................................................... 79

4.3.6 Royalty – pros and cons – gold ............................................................................................................ 79

4.3.7 Withholding tax on dividends and interest ......................................................................................... 80

4.3.8 Comparison of government takes for gold .......................................................................................... 80

4.4 Copper ............................................................................................................................................. 81

4.4.1 Base case of exploitation of copper .................................................................................................... 81

4.4.2 Figure of government takes for copper ............................................................................................... 82

4.4.3 Level of government takes – copper ................................................................................................... 82

4.4.4 Corporate tax – copper ........................................................................................................................ 82

4.4.5 Diversity over simplicity or vice versa – copper .................................................................................. 82

4.4.6 Royalty – pros and cons – copper ........................................................................................................ 82

4.4.7 Withholding tax on dividends and interest – copper .......................................................................... 83

4.4.8 Comparison of government takes for copper ..................................................................................... 83

4.5 Rare earth elements ...................................................................................................................... 84

4.5.1 Base case of exploitation of rare earth elements ................................................................................ 84

4.5.2 Figure of government takes – rare earth elements ............................................................................. 84

4.5.3 Level of government takes – rare earth elements .............................................................................. 85

4.5.4 Corporate tax – rare earth elements ................................................................................................... 85

4.5.5 Diversity over simplicity or vice versa – rare earth elements.............................................................. 85

4.5.6 Royalty – rare earth elements ............................................................................................................. 85

4.5.7 Withholding tax on dividends and interest – rare earth elements ..................................................... 85

4.5.8 Comparison of government takes for rare earth elements ................................................................. 86

4.6 Gemstones...................................................................................................................................... 87

4.6.1 Base case of exploitation of gemstones .............................................................................................. 87

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4.6.2 Figure of government takes – gemstones ........................................................................................... 87

4.6.3 Level of government takes – gemstones ............................................................................................. 88

4.6.4 Corporate tax – gemstones ................................................................................................................. 88

4.6.5 Diversity over simplicity or vice versa – gemstones ............................................................................ 88

4.6.6 Royalty ................................................................................................................................................. 88

4.6.7 Withholding tax on dividends and interest ......................................................................................... 88

4.6.8 Comparison of government takes for gemstones ............................................................................... 88

4.7 Zinc .................................................................................................................................................. 89

4.7.1 Base case of exploitation of zinc.......................................................................................................... 89

4.7.2 Figure of government takes – zinc....................................................................................................... 90

4.7.3 Level of government takes – zinc ........................................................................................................ 90

4.7.4 Corporate tax – zinc ............................................................................................................................. 90

4.7.5 Diversity over simplicity or vice versa – zinc ....................................................................................... 90

4.7.6 Royalty – pros and cons ....................................................................................................................... 90

4.7.7 Withholding tax on dividends and interest ......................................................................................... 90

4.7.8 Comparison of government takes for zinc .......................................................................................... 91

4.8 Uranium ........................................................................................................................................... 91

4.9 Main observations and trends as well as changes under consideration ............................ 91

4.9.1 Government take level ........................................................................................................................ 91

4.9.2 Royalty ................................................................................................................................................. 92

4.9.3 Alternative Greenland models for consideration ................................................................................ 92

4.9.4 Iron ore, gold, copper and zinc ............................................................................................................ 92

4.9.5 Administration of control and collection of government take in Greenland ...................................... 93

4.10 Recommendations ........................................................................................................................ 93

4.10.1 Recommendations for future taxation of all metals and minerals, except for uranium, rare earth

elements, copper, gold and gemstones ........................................................................................................... 93

4.10.2 Recommendations for future taxation of gold and copper...................................................... 94

4.10.3 Recommendations for future taxation of rare earth elements ................................................ 95

4.10.4 Recommendations for future taxation of uranium .................................................................... 95

4.10.5 Recommendations for future taxation of gemstones ............................................................... 95

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Appendix 1

Detailed description of Greenland's oil and gas

strategy 2014-2018

Appendix 1 to proposal for Greenland's oil and mineral strategy 2014-2018

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APPENDIX 1 Oil/gas strategy for 2014-2018

1.1 Knowledge – status and assessment of the current strategy A central element of the current strategy has been the preparation and launch of oil/gas licensing

rounds. Licensing rounds have typically been carried out at intervals of about two years since

2002 in the

form of a

combination

of licensing

rounds and

”open door

procedures”.

The regular

launch of

licensing

rounds and

open door

procedures

has resulted

in a number of

exclusive

licences

having being granted for oil/gas exploration and exploitation activities in Greenland. Below follows

a brief summary:

The licensing rounds in 2002 and 2004

resulted in the Canadian exploration

company Encana being granted two

exploration and exploitation licences,

referred to as the Lady Franklin and

Atammik blocks offshore to the west of

Nuuk. The licenses have subsequently

been assigned to Cairn Energy

(Capricorn Greenland Exploration A/S).

The licensing rounds in the Disco-

Nuussuaq region in 2006 and 2007

resulted in some of the world's biggest

oil companies being granted a total of

seven exploration and exploitation

licenses. The licence holders are

distributed over the following licences:

Sigguk and Eqqua (Cairn Energy,

Nunaoil), Puilasoq (DONG, ExxonMobil,

Chevron, Nunaoil), Orsivik (ExxonMobil,

Husky, Nunaoil), Kangerluk and Ikermiut

(Husky, Nunaoil) and Naternaq (PA

Resources, Nunaoil).

What is a licensing round?

In the dossier, the Government of Greenland describes the licence

terms, the licence blocks available, the application date, the selection

criteria, etc.

After the application date, the applications are then evaluated at the

same time. If there are two or more applicants for the same licence

block, the applications will be evaluated on the selection criteria.

What is an open door procedure?

In an open door procedure, the

Government of Greenland designates

an open door area which will be open

for ongoing licensing. In the dossier,

the Government describes the licence

terms, the open door areas available,

the selection criteria, etc.

Applications are considered in the

order received.

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In 2008, Cairn Energy and Nunaoil were granted four exploration and exploitation licences in the

open door area off South-West Greenland, called Kingittoq, Saqqamiut, Sallit and

Uummannarsuaq (Cairn Energy, Nunaoil).

In 2010, a licensing round was carried out in the Greenlandic part of Baffin Bay. The Bureau of

Minerals and Petroleum received 17 applications for exploration and exploitation licences and

following a thorough evaluation of the applications based on the selection criteria specified in the

dossier a total of seven exclusive licences for oil and gas exploration and exploitation were

granted to the following oil companies: Qamut (ConocoPhillips, DONG, Nunaoil), Anu and Napu

(Shell, Statoil, GDF SUEZ, Nunaoil), Pitu, Napariaq and Ingoraq (Cairn Energy, Nunaoil) and Tooq

(Mærsk Oil, Nunaoil). Statoil and Tullow have subsequently become parties to the Pitu and Tooq

licences, respectively.

In 2012 and 2013, a two-phase licensing round was carried out in the Greenland Sea in North-

East Greenland. The licensing round consists of a pre-round and an ordinary round. It is

anticipated that between five and seven new licences will be granted in this region. As a result, an

extensive data collection effort will be conducted in this area in the next years.

As in connection with earlier licensing rounds, a number of in-depth studies have been made prior

to the launch of this licensing round, including a strategic environmental impact assessment of the

area, an assessment of its geological potential, a benchmark analysis of fiscal terms as well as ice

studies. The preparatory work follows e.g. from the hydrocarbon strategy 2009.

The strategic environmental impact assessment of the Greenland Sea has contributed, among

other things, to determining the areas to be made available for exploration activities – and the

areas which will not be available to the industry. SEIAs are also used to determine the factors in

the environment and nature which the companies must take particular care to provide for in their

planning and operations in the areas.

From a geological perspective, the area is one of the most interesting areas in Greenland as

regards its oil/gas potential. In a report from 2008, the USGS estimated that the area may hold

31bn barrels of undiscovered oil/gas resources (middle estimate). This estimate is obviously

subject to high uncertainty, and any finds which are made may turn out to deviate substantially.

When the coming years’ prospecting programmes have been completed, it will most likely be

possible to say whether oil/gas occurs in commercially viable quantities and, if so, the size of such

quantities.

The first phase of the licensing round in the waters off North-East Greenland (the pre-round) was

the result of the preferential position of the so-called KANUMAS companies under the so-called

KANUMAS agreements (from 1989 and 2009). It is thus a requirement in the pre-round that the

operator in the group of applicants must be one of the KANUMAS companies (StatoilHydro, BP,

ExxonMobil, ChevronTexaco, Shell, Japan Oil, Gas and Metals National Corporation) or a

subsidiary of one of these companies.

On the final application date, the Government of Greenland received eleven applications for

oil/gas exploration and exploitation licences. The applications came from three different groups of

applicants who competed for the most coveted licence blocks. The applications received were

evaluated on the basis of the selection criteria specified in the dossier. Based on an overall

assessment, the Government of Greenland decided to grant four exclusive oil/gas exploration and

exploitation licences. The licences were granted to the following oil companies: Statoil,

ConocoPhillips and Nunaoil, Block 6 (”Avinngaq”), ENI, BP, DONG and NUNAOIL, Block 8

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(”Amaroq”) and Chevron, GreenPex, Shell and NUNAOIL, Block 9 (”Umimmak”) and Block 14

(”Nerleq”).

On the final application date for the second round, the Government of Greenland had received

three applications for oil/gas exploration and exploitation licences and the applications came from

two different groups of applicants. The evaluation process was still in progress at the time of

drafting of this strategy (at the end of December 2013).

The Government of Greenland believes that the current licence strategy has resulted in a

satisfactory number of licences. Thanks to the strategy, the interest of the foreign mineral

resources companies in carrying out exploration activities in Greenland has successfully been built

up and maintained.

Oil exploration activities are characterised by substantial investments and not least substantial

exploration risks. A key element in the planning of an oil/gas licence strategy is thus to maintain a

continuously high level of exploration activity in different regions of Greenland.

The reason for this is that it is impossible to predict in advance which region will first lead to the

desired breakthrough in the oil activities. It may thus be expected that not all existing licence areas

will lead to commercial finds.

In step with the geological knowledge about the subsoil improving, it may thus be expected that

exploration activities in some licence areas will be intensified. At the same time, it must be

expected that other licence areas will be relinquished if the geological parameters are not

considered promising enough when viewed against the expected cost level of initiating additional

exploration activities.

One example of this natural development is Cairn Energy's exploratory drillings in 2010 and 2011.

Based on the initial geophysical exploration results, the company found that the potential in some

of the licence areas was so promising that the company wished to intensify the exploration by

carrying out exploratory drillings. A total of eight drillings were completed in 2010 and 2011. The

wells were drilled in different sedimentary basins offshore West Greenland and in several of these

Cairn Energy found small quantities of oil and gas which were not big enough for commercial

exploitation though. Cairn Energy's drillings in 2010 and 2011 ran into a total of around DKK 6bn.

The map in Figure 1 provides a status of exclusive licences for exploration and exploitation of

oil/gas in Greenland currently granted.

1.2 New licence strategy objectives In the Government of Greenland's opinion, the oil/gas licence strategy pursued so far has

delivered on its objective of creating and sustaining industry interest in oil exploration in

Greenland. The Government of Greenland’s objective is to carry on its efforts to attract investors

in oil exploration activities in Greenland. The Government of Greenland’s objective is to have oil

exploration activities in different regions of Greenland. The current licence level is regarded as

satisfactory. In order to maintain the current level of activity, it is necessary to make new licence

areas available at regular intervals in order to compensate for the licence blocks which will be

relinquished over time.

As described in the next section, the geological assessment is that the following areas will be of

particular interest:

Onshore areas of Disco and the Nuussuaq Peninsula

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Onshore area of Jameson Land

Areas offshore South Greenland and South-West Greenland

Offshore areas in Baffin Bay

Offshore areas in the Davis Strait west of Nuuk

12

Figure 1: Exclusive hydrocarbon exploration and exploitation licences, active as at 31 December 2013.

13

1.2.1 Future licence policy Within the next five-year period, the goal is to conduct licensing rounds at intervals of approx. two or

three years. As opposed to previous years' licensing rounds where very large blocks of 10,000 square

kilometres or more were made

available particularly in the

Disco West and Baffin Bay

licensing rounds, it is

proposed as a result of

improved data coverage in the

different regions to license off

smaller blocks of 1,000-4,000

square kilometres instead.

The blocks will be defined to

ensure that each of them has

at least one attractive target

for exploration. This procedure

was also followed in the

licensing round for the

Greenland Sea in North-East

Greenland.

Similarly, it is recommended to

use a grid of 10 by 30 arc

minutes to divide the blocks, a

procedure that was also

followed in the licensing round

for the Greenland Sea (see

Figure 2).

Below follows a description of

the different regions which the

Government of Greenland

intends to make available over

the next five years.

Figure 2: Grid of 10 by 30 arc minutes, to be used for the new licence

areas. New blocks will be defined according to this grid.

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1.2.2.1 Onshore Disco & Nuussuaq Peninsula Since 2003, no oil/gas licences have been available for the Disco-Nuussuaq region. Since then, there

have been a lot of inquiries particularly for the Nuussuaq Peninsula concerning the possibility of

applying for oil/gas exploration licences, mostly from small and medium-sized oil companies.

At the same time, mineral companies have shown an interest in taking out drill cores in the northern

part of the area for mineral

exploration purposes. Seismic data

have also been collected on the

western part of Disco Island. Those

data will be important in the

assessment of the future potential

of the area. On Disco Island and

the Nuussuaq Peninsula,

hydrocarbon seeps have been

observed in the volcanic layers and

horizons of coal have also been

found. The onshore area of the

Nuussuaq Peninsula which is

proposed to be included in the

licence area to be made available

in 2016 is 6,000 square kilometres

(see Figure 3). The entire Disco

Island has been included in the

coming licensing round. The blocks

which will be made available will be

somewhat smaller than in the areas

offshore. The blocks will be defined

to ensure that each of them has at

least one area of interest.

The first discoveries of oil seeps in

the Disco-Nuussuaq-Svartenhuk

region were made in 1992, and

extensive geological surveys have

been carried out since then.

The results from onshore drilling activities have shown that there are several levels of oil impregnated

rocks in the area and some intervals with gas under pressure. Geochemical analyses of the organic

material in the layers have shown a content of five different oil types in the layer series, and in one of

the units the oil is of the same type as in an important source rock known from the shelf off

Newfoundland in eastern Canada. Overall, the results from the Nuussuaq Basin are regarded as

positive and showing possible oil deposits in the onshore area between Disco and the Svartenhuk

Peninsula.

The onshore area of Disco-Nuussuaq will be made available in an ordinary licensing round in 2016,

when important data from adjacent offshore areas will have been released. Results from exploration

activities on Disco-Nuussuaq will provide important information which will also be of relevance to

offshore exploration activities in the area. The results may therefore be used in the future strategy for

Figure 3: Onshore licence area on Disco Island and Nuussuaq.

15

the areas offshore Disco-Nuussuaq for which no exploration licence will be granted in this strategy

period. The current state of knowledge of the area suggests the presence of several prerequisites for

success.

1.2.2.2 Baffin Bay In Baffin Bay, North-West Greenland, five exploration and exploitation licences were granted in 2011.

Since then and in future, a large amount of new data will be collected. The data collected will form the

basis of an ongoing evaluation of the areas in Baffin Bay and will be used in the evaluation of how

those areas may be expanded in future to also include larger licence areas in those geological

provinces.

Exploratory drillings are expected in

Baffin Bay in 2014/2015. The

Government of Greenland will decide

whether to conduct a licensing round

in the area in 2016/2017, depending

on the results of the exploratory

drillings planned in the region for the

coming years. The areas which will be

made available have been selected to

ensure that they are within the

boundaries of the continental shelf.

The blocks will be defined by following

the grid of 10 by 30 arc minutes.

Over the past six years, extensive

geophysical surveys have been made

in the north-eastern part of Baffin Bay,

and seabed samples with organically

rich upper cretaceous shales indicate

the potential presence of source rock

in the area. Taken as a whole, all

components in an active hydrocarbon

system are present in the northern part

of Baffin Bay, but exploration will be

challenging, subject to local geological

conditions. And results from new

exploratory drillings will therefore be

crucially important to the region.

In the southernmost part of Baffin Bay

bordering onto the Davis Strait

(northern Disco West), five offshore

exploratory drillings were made from

2010 to 2011. Four of those drillings

are located just south and west of the

proposed licence area (Figure 4).

The fifth drilling is located inside the proposed licence area (Delta-1). The drill did not go all the way

through the volcanic basalts and into the underlying targets for exploration. One of the drillings (Alpha-

1S1 – see Figure 4) showed signs of hydrocarbons in volcanic rocks, while another showed the

presence of gas in thin sandstone layers.

Figure 4: Map of the proposed licence area in Baffin Bay (red

cross-hatched areas), depending on drilling results in existing

exclusive licences in Baffin Bay (grey areas).

[Billedtekst: Current exclusive licences New licence areas – Baffin Bay]

16

Active hydrocarbon systems have been demonstrated to exist on several locations in the regions

around the area made available. This includes, for instance, oil seeps of five different types of oil along

the Disco coast and also the Nuussuaq and Svartenhuk peninsulas east and south-east of the licence

area. In addition, oil seeps have been extensively documented to exist in the Scott Inlet on the

opposite Canadian side of Baffin Bay (approx. 72°N latitude). The proposed licence area stretches

from approx. 71° to 75°N latitude, but has been divided into two segments: a small northern segment

(approx. 6,600 square kilometres) and a large southern segment (approx. 40,000 square kilometres) –

see Figure 4.

A licensing round in the Baffin Bay area north of 71°N in 2016/2017 will depend on the results of the

expected drillings in the northern part of Baffin Bay. The results will contribute to eliminating some of

the geological uncertainties which exist in the area. In case of a positive result, it would be natural to

also make this southern area of Baffin Bay, which has several similarities with the northern part of

Baffin Bay, available for exploration activities.

1.2.2.3 Davis Strait – Nuuk West – 63°-67°N It is currently considered to include an area in the Kangâmiut, Nuuk and Lady Franklin basins, offshore

West Greenland between 63°N and 67°N (also known as Nuuk West – see Figure 5) in one of the

coming licence rounds. This licence area in the Davis Strait totals approx. 82,000 square kilometres,

excluding the two existing exploration blocks (Lady Franklin and Atammik).

The Government of Greenland will therefore divide the total licence area into two smaller segments,

a northern segment from 65°N to 67°N containing

the Kangâmiut and Nuuk basins and a southern

segment from 63°N to 65°N containing the Hecla,

Fylla and Maniitsoq rises.

The area is not included in the USGS 2008

estimate for West Greenland/East Canada, but is

the southern extension of the USGS assessment

unit AU-2, which has been estimated overall to

contain around 6,000m barrels of oil equivalents

(average estimate).

Parts of this area have been included in a previous

licensing round, and this is where the first

exploration activities began in the 1970s and the

first exploratory drillings were made in Greenland.

Since then, large volumes of data have been

collected, particularly 2D seismic data (0.61 line

kilometre/square kilometre) and four exploratory

drillings have been made. Together with the

seismic data, analyses of the earlier drillings have

shown that there are several large areas of

interest. Furthermore, surveys have shown the

presence of a thick clay pack which may be a

potential seal. The drillings in 2011 also revealed

the presence of an active hydrocarbon system in

the area.

Figure 5: Map of the Nuuk West licence area –

indicated by the red lines.

17

Similarly, seabed samples were taken around the Qulleq-1 drilling in 2012 for the purpose of

documenting the presence of an active hydrocarbon system, and it is expected that a large data

processing operation of old seismic data may provide new information about the area.

The Nuuk West area will be made available for licensing in the last part of the strategy period as large

volumes of important data will be released and re-processed over the strategy period. It is important

that those data are available when a licensing round is launched to ensure that the exploration

activities are as efficient as possible. Previous surveys have shown that the area contains several

large untested structures which will be in focus in connection with a coming licensing round.

1.2.2.4 Open door area South-West Greenland

The area offshore South-West Greenland between 60°N and 63°N and west of 42°30’W and south of

60°N has been an open door area since 2008 (see Figure 6). Since early 2009, Cairn Energy PLC has

held four exploration licences in the coastal parts of the open door area, two of which they have

requested to relinquish.

In the past five years, 2D and 3D

seismic data have been collected,

but data are still limited and mostly

concern the coastal areas where the

water depth is less than 2,000

metres. Exploration activities in this

open door area are subject to some

uncertainty, but the new data

indicate the presence of quite deep

sedimentary basins with larger

structures, similar to those existing

on the Canadian side of the

Labrador Sea where a promising

hydrocarbon system has been

shown to exist.

The open door area will be

maintained in its present form, but in

future licences will be defined based

on the grid of 10 by 30 arc minutes

which has been introduced.

The recently collected data show the

presence of fault blocks which are

interesting from an exploration

perspective, but the low data density

of the area means that the area will

remain an open door area until data

density increases.

Figure 6: Open door areas, South-West Greenland.

[Billedtekst: Existing exclusive licences Open door – South Greenland]

18

1.2.2.5 Open door area onshore Jameson Land

In the 1980s, Jameson Land saw some

exploration activity when ARCO started

exploring the area. In that connection, 2D

seismic data were gathered in the area,

but since then no other geophysical data

have been collected.

Even so, there have been several

geological field trips to the area and

campaigns to map the area. It is believed

that the next exploratory step will be

collection of 3D seismic data or a drilling.

The area has been an open door area

since 2002, and it will remain so

throughout this five-year period (see

Figure 7).

There are several mineral companies in

the area which hold a licence to explore for

minerals, and any operator of a

hydrocarbon exploration licence would

have to carry out its activities with due

regard to the current exploration activities.

The onshore area of Jameson Land will be

made available as an open door area due

to the relatively modest data coverage.

1.2.2.6 Licence strategy 2014-2018 Summing up, the Government of Greenland will pursue the following strategy for its licence policy in

the area:

The licence areas and the order in which they will be made available have been determined with a

view to prospectivity as well as to availability of important data from surrounding areas. In several

cases, there will thus be a connection between the results from licence areas which have already

been made available, on the one hand, and the availability of improved data sets on the licence areas,

on the other hand, to ensure efficient exploration. Similarly, the licence strategy reflects the fact that

some of these areas may form part of a more long-term strategy for as yet unexplored areas in and

around Greenland with potential oil/gas prospectivity.

The following areas will be designated open door areas from and including 2014:

o Areas offshore South/South-West Greenland south of 63°N

o Onshore area of Jameson Land

Licensing round for onshore areas of Disco-Nuussuaq in 2016

Figure 7: Open door area onshore Jameson Land shown as red

cross-hatched area.

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Licensing round for offshore areas in Baffin Bay north of 71°N in 2016/2017, subject to the

result of anticipated drillings

Licensing round for offshore areas in the Davis Strait west of Nuuk (63°N-67°N) in 2018

It is recommended to maintain the multi-pronged approach to oil/gas exploration activities with

exploration activities being carried out in a number of Greenland's geological provinces. This is

recommended in order to increase the understanding of the geology of the areas but also due to

differences in climate, ice conditions and the resulting differences in what will be possible from an

operational perspective. These factors are duly reflected in the proposed strategy.

The following sections provide a summary of the environmental and physical conditions prevailing in

the areas. Then follows a brief description of the proposed licence terms and licensing terms and

conditions.

1.3 Environmental conditions in the proposed areas In co-operation with the Greenland Institute of Natural Resources (GINR), DCE prepares strategic

environmental impact assessments (SEIAs) which form part of the data on which the political decision

to make a sea area available for oil exploration is based. Strategic environmental impact assessments

describe the biological and physical background condition of the relevant area and estimate the impact

of oil activities on nature and environment and how to best limit such impact.

At the same time, strategic environmental impact assessments help identify the need to increase and

improve the knowledge base about the areas and their ecological contexts.

1.3.1 Baffin Bay The environment of the Baffin Bay licence area is described in the strategic environmental impact

assessment report published in an updated edition in 2012 (www2.dmu.dk/Pub/SR9.pdf). The area is

also covered by an environmental oil spill sensitivity atlas for the coastal zone

(www2.dmu.dk/Pub/FR828.pdf) and an additional atlas covering the northern part is currently being

prepared.

The strategic environmental impact assessment report describes the marine environment as being

characterised by the presence of sea ice a large part of the year. Even so, the area is very rich in a

biological/ecological sense. This leads to concentrations of marine mammals and birds, and also

made it possible for human beings to settle permanently in the area about 1,000 years ago. Along the

shorelines of Greenland, more than 80% of the global population of the very abundant little auk is

found – estimated at more than 30 million pairs. But also the shorelines in the Upernavik area have

large populations of breeding birds (particularly the thick-billed murre) because the sea ice breaks up

early there. The birds which are found in the area include nationally and internationally important red-

listed species such as thick-billed murre, eider, black-legged kittiwake, Arctic tern and Atlantic puffin.

The marine mammals include important (nationally as well as internationally red-listed) species such

as polar bear, walrus, narwhal, Beluga whale and bowhead whale. There is a special population of

narwhals which spend their summer in the inner parts of Melville Bay, which is an important source of

income for the people living in near-by settlements.

Greenland halibut and shrimp are utilised on a commercial basis in the southern part of the licence

area, and hunting and fishing for local use are important activities along the inhabited coasts.

The inner part of Melville Bay is a designated nature reserve, primarily to protect polar bear and

narwhal. A number of the major bird cliffs in the Upernavik area have been designated bird protection

areas, and all of the sea bird colonies, including the very large and extensive little auk colonies in the

area around Thule, are generally protected against disturbance (see the Bird Protection Order). The

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coastal zone atlas points outs that particularly the coastal waters are extremely sensitive to oil spills.

The Mineral Licence and Safety Authority's field rules and various guidelines identify a number of

"areas of importance to wildlife" and protection areas in connection with seismic activities. The "areas

of importance to wildlife" are several coastal areas where activities are subject to regulation in

vulnerable periods, and the seismic areas include important narwhal and walrus habitats.

In connection with the first edition of the strategic environmental impact assessment report (2009), a

number of studies were made of the environment in Baffin Bay, including a survey of benthic fauna,

fish, polar bear and narwhal, which have been incorporated into the updated edition from 2012. But

additional knowledge is needed, which will help to:

a) assess, plan and regulate activities to minimise the risk of environmental impact

b) identify the most vulnerable areas

c) establish a knowledge base for "before and after" studies of the impact of major oil

spills

Similarly, it is important to continuously track any impact of oil/gas activities, including seismics, on

narwhals in Melville Bay.

By way of example, the following additional studies are needed: surveys of predictable and localised

occurrences (hot spots) of high primary production and biodiversity, including studies of their

ecosystem, the prevalence of larvae of shrimp and crab and their drift with sea currents and

settlement on the sea floor, identification of sensitive areas for benthic fauna and flora as well as

studies of important populations of birds, marine mammals and commercial species of fish.

For oil spill response purposes, there is a need for a number of studies to be made and then shared

with the other licence areas described here. By way of example, the following studies are needed: the

potential for degradation of oil in the water column and sediments, studies of the impact of oil (toxicity)

on key species in the area, impact and degradation of residues from oil burning at sea, the potential

for bioremediation of beached oil and the likelihood of an oil spill from an offshore licence site

contaminating the fjord areas.

It is proposed to increase co-operation with Canada to determine the possible cross-border effects of

Greenlandic oil activities.

1.3.2 Offshore areas in the Davis Strait west of Nuuk The environment of the Nuuk West area is described in the preliminary strategic environmental impact

assessment report for the Davis Strait (www2.dmu.dk/Pub/SR15.pdf). The Nuuk West area is also

covered by the environmental oil spill sensitivity atlas for the coastal zone made by DCE and GINR

(www4.dmu.dk/1_viden/2_Miljoe-tilstand/3_natur/sensitivity_mapping/62_68/atlas.pdf).

The preliminary strategic environmental impact assessment report points out, among other things, that

the relatively shallow-water banks, the different water masses which meet and the presence of sea ice

during winter particularly in the northern part of the area are important factors for the biology/ecology

of the area.

The biodiversity of the free water masses is generally low, but several species are very numerous and

found in dense concentrations, and are characterised as ecosystem key species because the

populations of birds and marine mammals are entirely dependent on them. The banks on the seabed,

however, are characterised by high biodiversity.

Fish fauna is dominated by demersal species such as Greenland halibut, redfish, wolffish and other

non-commercial species. One area of importance is the primary spawning ground of Greenland halibut

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from the entire Baffin Bay and the Davis Strait which is located in deep waters on the boundary

between Greenland and Canada. All Greenland halibut which are caught further north, e.g. in the

Disco Bay, are most likely from this area. Sandeels are found in dense schools at the fishing grounds

and are a key prey for fish, seabirds and baleen whales. In coastal waters capelin and lumpsucker

spawn. Capelin is an important prey for larger fish, seabirds and marine mammals. Cod is found in the

fjords, and cod and lumpsucker (the eggs) are utilised commercially. Char is also an important species

in coastal waters. Other species which are utilised on a small scale, commercially or non-

commercially, include salmon, Atlantic halibut and wolffish.

There are rich bird populations in the area – along the shorelines during the six months of summer,

particularly the species breeding in colonies such as black-legged kittiwake, thick-billed murre, Atlantic

puffin and razorbill, as well as populations of moulting divers such as harlequin ducks (listed as "near

threatened" (NT) on the Greenland Red List). During the six months of winter, there are very large

populations of seabirds along the coasts and on the banks. The area is very important as a wintering

area for birds from all over the North Atlantic region, and the most abundant species are thick-billed

murre, common eider, king eider and black-legged kittiwake. The birds are particularly sensitive to

disturbance and oil spills.

Marine mammals are an important part of the ecosystem. Among the most important and most

sensitive species are walrus, which winter in the northern part of the area, and hooded seals, which

whelp on the sea ice far off the coast west and south-west of Nuuk. The very rare harbour seal, which

is listed as "critically endangered" (CR) on the Greenland Red List, is found in some of the fjord areas.

Among the whales which are sensitive to disturbance from seismics and other activities are species

which are found during the winter (bowhead whale, beluga whale and narwhal – all listed on the

Greenland Red List, the latter two also on the international red list) and also species which are found

during the summer (baleen whales, harbour porpoise, sperm whale, northern bottlenose whale and

others).

There is widespread human use of natural resources throughout the area: Recreational fisheries and

small-scale commercial fisheries in the coastal areas, and significant commercial shrimping and

Greenland halibut fisheries in open waters.

There are no sites in the Nuuk West area or in the near-by coastal areas which have been designated

a nature protection area under international conventions. The only site which is protected under

national legislation is an area of geological interest (the island of Akilia). Along the shorelines there are

many seabird breeding colonies (see the Bird Protection Order).

In open waters, the coastal zone atlas identifies the coastal area of the banks from Maniitsoq and

further south as extremely sensitive to oil spills.

The strategic environmental impact assessment is preliminary and points out that a strategic

environmental research programme should be developed and carried out in the same way as in the

Baffin Bay and Disco West licence areas. The purpose is to strengthen the assessment, planning and

regulation of activities, to identify the most vulnerable areas and to establish a knowledge base for

"before and after" studies of the impact of major oil spills. Such studies could include: surveys of

predictable and localised occurrences (hot spots) of high primary production and biodiversity with

studies of their ecosystem, the prevalence of larvae of shrimp and crab and their drift with sea currents

and settlement on the sea floor, identification of sensitive areas for benthic fauna and flora as well as

studies of important populations of fish (commercial), birds and marine mammals. Like in other areas,

there is a need for a better understanding of the impact of seismic surveys on marine mammals.

22

For oil spill response purposes, there is also a need for a number of studies: the impact of oil on key

species in the area, the potential for degradation of oil in the water column, impact and degradation of

residues from oil burning and the potential for bioremediation of beached oil.

The most recent coastal zone atlas identifying areas which are particularly sensitive to oil spills is from

2000. There are therefore plans to update it with the new research.

1.3.3 Onshore area of Jameson Land

Jameson Land is described in a strategic environmental impact assessment report published in 2012.

The report points out that Jameson Land is unique in a Greenland context due to its large continuous

lowland areas. The only alpine areas are to the north, with long and wide valleys. The lowlands and

the valleys have a rich nature with relatively luxuriant vegetation in numerous fens and dwarf scrub

heath, and there are several salt marshes along the shoreline bordering Hall Bredning. Those areas

have rich flora and wildlife, the most important being muskoxen, geese and waders.

Jameson Land is home to the largest and most dense population of muskoxen in East Greenland, and

it is utilised by the inhabitants of Ittoqqortoormiit. The oxen are mostly found in the lush lowlands with

Ørsted Dal and its neighbouring valleys as some of the most important areas for the species.

Two species of geese – barnacle and pink-footed geese – are abundant in the area. They are found in

the lush wetlands, and moulting birds in particular are seen in dense concentrations around lakes,

rivers and salt marshes. They are so abundant that several areas in Jameson Land have been

designated wetlands of international importance to the two species.

Other important birds include waders which are dispersed over the lowlands and also some species

which are rare to Greenland such as Sabines gull, whimbrel and golden plover.

Several of the species mentioned are listed as endangered (red-listed) in Greenland: wolf, polar bear,

gyr falcon, golden plover, whimbrel, Sabines gull and Arctic tern.

The flora is rich with several endemic species (i.e. species only found here) and species which, as far

as Greenland is concerned, are restricted to Jameson Land.

The large population of geese has meant that two areas of Jameson Land have been internationally

designated as "wetlands of international importance" (Ramsar sites).

Muskoxen and geese in particular are sensitive to disturbance from the many activities entailed in oil

exploration. In connection with the previous oil activities in the area, areas were designated as "areas

of importance to wildlife" (see the Mineral Licence and Safety Authority's field rules) where disturbing

activities are subject to regulation in order to prevent impact on geese and muskoxen.

The strategic environmental impact assessment report concludes that general knowledge about the

environment in Jameson Land is good. However, it proposes that a number of surveys, particularly of

the muskoxen population, should be carried out before any activities are commenced.

Finally, the report points out that oil exploration in Jameson Land will lead to increased marine traffic in

the area and thus a potentially increased risk of marine oil spills and disturbance of marine wildlife.

The marine environment around Jameson Land is described in the strategic environmental impact

assessment report on the Greenland Sea (www2.dmu.dk/Pub/SR22.pdf), which also points out the

need for more knowledge of the area. No environmental oil spill sensitivity atlas has been made for the

coastal zones of the area.

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1.3.4 Onshore area of the Nuussuaq Peninsula The environment of this licence area is described in a preliminary strategic environmental impact

assessment report (www2.dmu.dk/Pub/FR652.pdf) from 2008. It only concerns the Nuussuaq

Peninsula, and no similar report for Disco Island exists.

The report for the Nuussuaq Peninsula describes the region as dominated by alpine areas. The

lowlands are limited to narrow coastal fringes and the large central valley in the hinterland. Most

wildlife and continuous areas of vegetation are found in the lowlands, and a large part of the oil

exploration activities are expected to take place there.

Disco is also characterised by alpine areas, but with significantly larger expanses of lowlands, in part

along the coasts and in part in several large valley systems. The vegetation in these lowlands is very

luxuriant and includes a number of special plant communities, for instance around the many

homoeothermic springs.

Onshore, the most important and most vulnerable wildlife is caribou and geese. Caribou is found only

on the Nuussuaq Peninsula, and they are a small isolated population which is sensitive to disturbance

from seismic surveys and other activities. There are several species of geese, with the Greenland

white-fronted goose as the most important because its breeding site is limited to central West

Greenland – it is endemic to Greenland. The population is on the decline, and the Greenland white-

fronted goose is listed as "endangered" (EN) on the Greenland Red List.

Along the coasts there are sensitive populations of seabirds, both moulting divers and breeding

colonies, particularly of fulmar, cormorant and kittiwake.

Three areas – all on Disco – have been internationally designated as "wetlands of international

importance" (Ramsar sites). In addition, the Mineral Licence and Safety Authority's field rules

designate parts of the central valley on Nuussuaq and three areas on Disco as "areas important to

wildlife", where activities are subject to regulation to prevent disturbance to vulnerable goose

populations. On Disco, two coastal areas with vulnerable populations of moulting ducks have also

been designated as such areas.

The many homoeothermic springs are protected under national legislation, and some minor sites on

Disco are protected under national conservation legislation.

Onshore oil activities will lead to increased marine traffic in the area and thus a potentially increased

risk of marine oil spills and disturbance of marine wildlife. These issues are described in an updated

strategic environmental impact assessment report on oil exploration in the sea off Disco and

Nuussuaq from 2013 and in an updated coastal zone atlas from 2012.

The strategic environmental impact assessment report on Nuussuaq points out that a number of

studies are needed to avoid or minimise disturbance to key species and for the purpose of deciding

the lay-out of pipelines in case production is commenced: counting and surveys of moulting Greenland

white-fronted geese, surveys of the caribou population, including surveys of calving grounds and

migration routes, as well as general surveys of sensitive flora and fauna, including field and satellite

surveys of vegetation types.

There is also a need for a strategic environmental impact assessment of oil activities on Disco, among

other things to identify the need for future environmental studies.

1.3.5 Areas offshore South Greenland and South-West Greenland The environment in the South-West Greenland licence area is described in the strategic environmental

impact assessment reports on South Greenland and the Davis Strait published in 2012. The area is

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also covered by the environmental oil spill sensitivity atlas (coastal zone atlas) published by DCE and

GINR in 2004.

The strategic environmental impact assessment reports point out that a major part of the assessment

area consists of deep water (> 2,000 m, maximum depth 3,700 m), the continental shelf in this part of

Greenland being relatively narrow. The coastal topography is complex, with many archipelagos and

fjords, and most shorelines are rocky with a relatively large tidal range.

As in other waters around Greenland, primary production peaks in spring when the water column

stabilises, and declines during summer as nutrients disappear. The highest productivity occurs in

areas where nutrient-rich water is brought from the bottom up to the surface, for instance along the

shelf break. Sea ice in the form of drift ice is brought to this area with the sea currents from East

Greenland.

The biodiversity of the free water masses is probably low and dominated by a few, but abundant

species. The copepod Calanus finmarchicus is an important food source for small pelagic fish (e.g.

capelin and sandeel) and larvae of larger demersal fish (e.g. cod). The deep waters of the Labrador

Sea are one of the most important overwintering areas for the copepod, and copepods originating

from this area are likely to support commercial fisheries in Greenland and Canada.

Not much is known about benthic flora and fauna (algae at less than 50 m). But, like further north in

the Davis Strait, a rich and varied fauna is expected to exist on the banks and a rich flora consisting of

seaweed is expected to exist along the shorelines.

Most species of fish and shellfish in the assessment area are demersal. Northern shrimp and snow

crab are common. Greenland halibut is less abundant than further north in Greenland, while the

largest populations of Atlantic cod in open waters in West Greenland are found in the assessment

area. Redfish is abundant in deep waters. The coastal zone is particularly important for spawning

capelin and lumpsucker. The ecologically most important species are pelagic schooling fish

(particularly capelin and sandeel), which are key prey for many larger fish, marine mammals and

seabirds.

The populations of breeding seabirds in the assessment area are relatively small, but highly diverse.

The most important colony is Ydre Kitsissut, which has the largest population in Greenland of the

common murre (listed as "endangered" (EN) on the Greenland Red List) and the largest population in

the assessment area of thick-billed murre and razorbill. The shorelines of the area are important for

moulting birds, particularly Harlequin ducks (red-listed as "near threatened" (NT) on the Greenland

Red List) along the outer shores. In late summer and in winter, the area is very important for common

eider and thick-billed murre. However, very little data exist on the prevalence of seabirds in the areas

outside the continental shelf.

With regard to seals, the assessment area is particularly important for the harbour seal (listed as

"critically endangered" (CR) on the Greenland Red List). In addition, an important whelping area of

harp seal was recently discovered in the drift ice off the South Greenland coast, and very large

numbers of hooded seals migrate through the area between their breeding and moulting sites. There

are important foraging areas for baleen whales, particularly humpback, minke, sei and fin whale, in the

area and sperm whale, harbour porpoise, bottle-nosed whale and other toothed whales are also in

common occurrence.

Commercial fisheries in the assessment area are relatively small-scale and have been declining in

recent years. The most important species are northern shrimp, snow crab, lumpsucker and Atlantic

25

cod. The most important fishing grounds are Julianehåb Bugt and the continental shelf break. Cod

fisheries are expected to increase in the coming years if a local spawning stock is re-established.

Commercial hunting and recreational fisheries and hunting take place near all villages and

settlements. Around a quarter of the landings of minke whale in Greenland are taken in the

assessment area, and harbour porpoise is also important for local fishers.

In the assessment area there are two areas which have been designated as "wetlands of international

importance" (Ramsar sites), more specifically the archipelago of Ydre Kitssiut and the Ikkattoq Fjord

north of Paamiut Isblink. The Ikka Bay at the Arsuk Fjord is protected under national legislation due to

a geologically unique occurrence. According to the coastal zone atlas, the banks, including the

continental shelf break, are identified as being extremely sensitive to oil spills.

The reef-growing cold water coral Lophelia pertusa was recently discovered in deep waters in the

licence area. Such reefs are on the OSPAR Convention list of particularly sensitive habitats. As a

result, special care must be taken to identify such reefs in connection with the background studies of

the environment to be conducted by oil companies when they apply for drilling licences.

The strategic environmental impact assessment report on South Greenland concludes that a strategic

environmental research programme with supplementary studies should be initiated, like in the Baffin

Bay and Disco West licence areas. The purpose is to strengthen the assessment, planning and

regulation of activities, to identify the most vulnerable areas and to establish a knowledge base for

"before and after" studies of the impact of major oil spills. Like in other areas, there is a need for a

better understanding of the impact of seismic surveys on marine mammals.

For oil spill response purposes, there is also a need for a number of studies to be made. Due to the

deep waters prevailing in a major part of the licence area, it is important to analyse a number of

factors, including the potential for degradation of oil in the water column and sediments, as the

experiences drawn from the Deepwater Horizon spill in the Gulf of Mexico in 2010 show that a large

part of the oil remained dispersed in the water. Other relevant studies would be studies of the impact

of oil (toxicity) on key species in the area, impact and degradation of residues from oil burning at sea,

the potential for bioremediation of beached oil and the likelihood of an oil spill from an offshore licence

area contaminating the fjord areas (relevant in connection with the Ikaite columns and the numerous

Norse ruins).

1.4 Physical conditions in the proposed areas The climatic changes as we witness them today with warming and melting of sea ice around

Greenland and the Arctic Ocean, melting of the Greenland ice sheet and thawing of permafrost are all

factors which are anticipated to affect the area of mineral resources.

Climate change will probably make future exploration activities easier, both at land and at sea. Higher

temperatures and thus longer field seasons, shorter winters, a longer season with open waters and a

decrease in ice extent and icebergs are all factors which will greatly increase the possibilities of

companies initiating activities to explore for mineral resources in Greenland.

In co-operation with the National Space Institute (DTU Space) and the Danish Meteorological Institute,

the Government of Greenland has carried out studies of ice conditions in Baffin Bay and North-East

Greenland. A study has also been made of the development in ice conditions in the Arctic Ocean and

its effects on Baffin Bay and North-East Greenland.

The most important physical environmental problem in relation to oil exploration in Greenland is sea

ice and icebergs. The prevalence of sea ice affects how and in which periods oil exploration activities

26

can be carried out at the current state of the art, and in certain areas drifting icebergs constitute an

operational challenge. When exploring for oil/gas along the eastern coast, it is important to look at the

impact on ice conditions in the Arctic Ocean, as large volumes of sea ice float from the Arctic Ocean

down along the eastern coast.

As will be seen from the figure below, the past decade has seen a significant decrease in Arctic sea ice extent.

Figure 8: Average monthly Arctic sea ice extent, September 1979-2013.

Figure 9a: Percentage age distribution of sea ice, 1983-2013, the University of Colorado, Boulder.

http://www.google.gl/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=p_2A1TgiAREfGM&tbnid=qHAjl0v

27

Icebergs are everywhere in the waters around Greenland and originate from a large number of glaciers along the shorelines. The largest icebergs are calved from glaciers at Ittoqqortoormiit on the eastern coast and in the Disco area on the western coast and also in the area north of the bay.

Figure 9b: Sea currents in Greenlandic waters. Figure 10: General drift pattern of icebergs.

In the strategy period, additional studies will be made of ice conditions and the physical environment in

general. The studies will be conducted by government authorities as well as private oil companies.

The findings of the studies will form part of the basis on which the potential drillings which are

expected to be carried out after the geological and geophysical studies proposed for the next ten

years are planned.

1.4.1 Baffin Bay The major part of the area is in the high Arctic region (average temperature in July is below 5°C). The

warm East Greenland current does not reach the area. The northern part of the area is dominated by

the cold southward flow of water and ice from the Arctic Ocean. The cold water inflow from the

northern Arctic Ocean is at its highest in the period from May to July, while the inflow of warmer water

from the Atlantic Ocean to the south is strongest during autumn/winter. The warmer water from the

south flows along the western coast of Greenland, but the deeper waters further west are colder. As a

result of weather phenomena from the North American continent as well as from the Greenland ice

sheet, there are often very strong winds in the entire West Greenland waters from Cape Farewell in

the south to Qaanaaq in the north.

The area is dominated by two types of sea ice: Drift ice and fast ice. Fast ice is anchored to the coast

and spreads to the west by as much as about 100 kilometres from the coast in the month of March.

Fast ice is first-year ice. Drift ice is primarily found in the western part of the area and is mainly first-

year ice, but its multi-year ice content may vary from 10% to 30%. In the month of January, 95% of the

area is typically ice-covered. But the ice is flexible and mobile, and in some places there are open

waters. The ice in the area is thicker than in the southern part of the West Greenland waters. When

the ice breaks, its thickness is usually 120-150 cm – with a thickness of up to 130-180 cm in Melville

Bay.

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The coastal current brings icebergs from glaciers from as far south as the Disco Bay into the area.

Moreover, icebergs drift into the area with the current from the Arctic Ocean. An estimated 25,000-

30,000 icebergs flow through the area every year.

1.4.2 Davis Strait The major part of the area is in the sub-Arctic region (average temperature in July is above 5°C). The

cold water inflow from the northern Arctic Ocean is at its highest in the period from May to July,

whereas the inflow of warmer water from the Atlantic Ocean to the south is strongest during

autumn/winter. The warmer water from the south flows along the western coast of Greenland, but the

deeper waters further west are colder. As a result of weather phenomena from the North American

continent as well as from the Greenland ice sheet, there are often very strong winds in the entire West

Greenland waters from Cape Farewell in the south to Qaanaaq in the north.

The area is dominated by two types of sea ice: 'Storis' and West ice. West ice is mainly first-year ice

formed in Baffin Bay and the northern parts of the Davis Strait. West ice dominates the eastern part of

the area. Storis is mainly first-year ice with a multi-year ice content of 10-30% as well as a few

icebergs encapsulated in ice floes. Storis dominates the central and western parts of the area. Ice

density in the area varies a great deal. In the month of March, an average of 5-10% of the sea is ice-

covered in the south-eastern part of the area, while up to 80% of the sea in the north-western part of

the area is ice-covered. The ice in the Davis Strait is not as thick as in Baffin Bay and will usually not

be thicker than 120 cm when the ice breaks.

The icebergs in the area generally have a smaller volume than icebergs north of 66°N. A major part of

the icebergs in the area originate from East Greenland where they follow the current around Cape

Farewell, floating northwards along the western coast of Greenland to as far north as Maniitsoq.

1.4.3 South-West Greenland The area is in the sub-Arctic region (average temperature in July is above 10°C). As a result of

weather phenomena from the North American continent as well as from the Greenland ice sheet, there

are often very strong winds in the entire West Greenland waters from Cape Farewell in the south to

Qaanaaq in the north. Due to the instability of the current flow in the area, the warmer water flowing

northwards along the coast disseminates farther into the deep waters than is the case along the

western coast of Greenland.

At Cape Farewell, the front between the Polar water and the Atlantic water is relatively sharp,

particularly in September and October. The front is more diffuse further north.

The area is usually not ice-covered, but in late winter parts of the area are sometimes covered by first-

year ice. The area is dominated by multi-year ice in the form of 'Storis', which originates from the

eastern coast of Greenland. Multi-year ice is normally found in the area all year round. The multi-year

ice reaches the area in December and January, depending on the current flows along the eastern

coast of Greenland, peaking in early summer. The multi-year ice reaches the area in December and

January, depending on the current flows along the eastern coast of Greenland, peaking in early

summer.

The icebergs in the area originate from East Greenland where they follow the current around Cape

Farewell. Due to the instability of the current flow in the area, some of the icebergs drift further west

and south-west instead of following the northward current along the western coast of Greenland.

1.4.4 Jameson Land Jameson Land is in the Arctic climate region with temperatures during summer (mid-June - August) of

0-10°C. Jameson Land covers an area of approx. 168 x 96 kilometres bordering the national park to

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the north. The weather is characterised by long periods of stable weather and low precipitation.

Topographically, the area is characterised by the higher areas being in the south-eastern part with

Rødstak (1,285 m) as the highest peak. The south-western part of the area is dominated by salt

marshes. The salt marshes stretch northward along the western coast of the area until they are

gradually replaced by rocks and alpine areas. At the northern shorelines the salt marshes also

dominate. Inshore, salt marshes are replaced by marshes and tundra with extensive vegetation and

numerous lakes. The sea and the fjords of the area are ice-covered during winter, and a few (like

Carlsberg Fjord) are usually also ice-covered during summer. Since Jameson Land is well north of the

Arctic Circle, midnight sun and winter darkness are dominant features of the annual cycle.

1.4.5 Nuussuaq Peninsula The Nuussuaq Peninsula is in the Arctic climate region with an average temperature below 5°C in the

warmest month of the year (July). Situated north-east of Disco Island, the Nuussuaq Peninsula is

approx. 175 kilometres long and 50 kilometres wide. The waters surrounding the peninsula are usually

ice-covered in the period from December to May. The area is dominated by alpine areas reaching as

high as 2,144 m. Extensive glaciers cover the highest parts of the area, and meltwater flows from the

glaciers to the rivers which lead some of the meltwater down to larger lakes in the central part of the

area, where the Aaffarsuaq valley is located. The valleys of the area are characterised by pingos (mud

volcanoes). The coasts are primarily steep rocky stretches, and the only salt marsh is found at the

mouth of the Aaffarsuaq valley.

1.5 Emergency response Under the Mineral Resources Act, anyone engaging in mineral resources activities is responsible for

planning an adequate emergency response to prevent and abate pollution. Before any activities are

commenced, the Government of Greenland must have approved the emergency response plan for the

activity in question. The mineral resources authority of the Government of Greenland will evaluate on

an ongoing basis if the emergency response plan is adequate and will supervise the response

capability as well. In addition, all activities are required under the Mineral Resources Act to be

consistent with the best international standards and practice, and to incorporate the best anti-pollution

measures available. This means that licence holders may be required in the relevant licences and

approvals to operate in accordance with international regulations, conventions and standards which do

not normally apply in Greenland or have not been officially adopted by Greenland.

Licence holders with a licence to explore for and extract mineral resources are responsible at all times

for operating their activities according to state-of-the-art safety standards. The emergency response

must be co-ordinated and suitable for co-operation with government emergency response resources.

Licence holders and their subcontractors, if any, are responsible at all times for maintaining an

efficient emergency capability to respond to hazards and accidents which may cause injury or loss of

human life, pollution or substantial property damage.

The licence holder is responsible for planning an adequate emergency response to prevent and

combat pollution caused by a mineral resources activity.

In future, it will still be a mandatory requirement for licence holders to ensure that their emergency

response plans for mineral resources activities are consistent with the best international standards and

reflect internationally recognised good practice in similar conditions.

1.5.1 Oil spill response Responsibility for the marine environment and thus the oil spill response in Greenland is generally

apportioned as follows:

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Inside the 3 nautical mile zone the Self-Government of Greenland has taken back

responsibility for the marine environment, with the Ministry of Housing, Environment and

Nature as the competent authority. In practice, the operational emergency response lies with

the local municipal emergency response units, which have equipment stockpiled in most of the

larger towns in Greenland.

Outside the 3 nautical mile zone Denmark is responsible for the marine environment, except

as regards mineral resources activities. In practice, the operational emergency response

lies with Arctic Command.

As far as mineral resources activities are concerned, no distinction is made as to whether an

emergency takes place inside or outside the 3 nautical mile zone as the Self-Government of

Greenland has taken back responsibility for the marine environment in connection with mineral

resources activities. This is reflected by the fact that licence holders which are engaged in

mineral resources activities are required to prepare an oil spill response plan and set up an

adequate oil spill response, while also providing an adequate financial guarantee to cover

clean-up activities in the event of an oil spill where the licence holder is not capable of carrying

out such activities