President Grímsson has been instrumental in Iceland's Arctic development (Photo: Hjalti Þór - Arctic Portal)The president of Iceland has announced that the country plans to set up a national wealth fund to safeguard revenue from potential oil discoveries as it opens up to exploration.

The Dreki area will be explored further next year and high hopes are that reserves will be found in the area.

Iceland has no history of oil exploration and no national oil wealth exists.

Faroe Petroleum Plc (FPM), Valiant Petroleum Plc (VPP) and Petoro AS will be the first foreign explorers to search Icelandic waters for oil and gas. They are betting that the geology matches that of the Shetland Islands, where BP Plc and Total SA are drilling, according to Faroe.

"Since we look at this resource as a national wealth, there will be a national wealth fund that would be established, but this is more of a general policy at this time," Grimsson said in an interview with Bloomberg in London this week. Explorers "have to do their work. It will take some years."

Icelandis already working with the member states of the Arctic Council to prevent oil spills in the North Atlantic and share equipment and technology for search and rescue operations.

Future oil industry regulations will be "within the framework of the Nordic as well as European cooperation," Grimsson said. They will be modeled on Iceland's geothermal and hydropower industry, he said.



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