The rich, cream-and-chocolate room furnishings, delicate finger foods and "speed networking" sessions at the five-star Jumeirah Carlton Tower hotel in Knightsbridge, London, are just what you would expect from an oil industry get-together.

But the faux leopard-skin chairs and radiators belting out heat feel at odds with the discussion about the ice and snow-bound Arctic, the latest hydrocarbon "frontier".

There is certainly a warm glow of excitement among investors in the room when oil explorer, Mike Watts, takes the podium at the event, billed as an 'oil and gas outlook Arctic day'. The man in a trademark City white shirt and sober tie is the deputy chief executive of Cairn Energy, the Scottish company at the epicentre of the new oil rush.

Greenland has been placed on the global oil map largely through Cairn's announcement about the "discovery" of hydrocarbons last summer. And Watts is quick to rattle off the positives: the region's "zero" political risk and "very little" commercial risk.

The Cairn executive favourably compares the opportunities available off Greenland with other areas which it has looked at – including Iraq ("no technical risk but plenty of political risk").

The scope for Arctic success is immense, he told the meeting last November, given upbeat assessments on potential reserves from organisations such as the US Geological Survey (USGS).

A report completed in 2008 by USGS argued that almost one-quarter of the undiscovered, technically recoverable, hydrocarbons in the world may be contained in an area north of the Arctic Circle. This – in numerical terms – amounts to 90bn barrels of undiscovered, technically recoverable oil, 1,670 trillion cubic feet of technically recoverable natural gas, and 44bn barrels of technically recoverable natural gas liquids in 25 geologically defined areas thought to have potential for petroleum.

That would mean the Arctic accounts for around 13% of the undiscovered oil, 30% of the undiscovered natural gas, and 20% of the undiscovered natural gas liquids in the world. About 84% of the estimated resources are expected to occur offshore, says the USGS in figures which the Russians argue hugely underestimate the contribution from their continental shelf.

Extracting these hydrocarbons would be hugely expensive using conventional means, but oil companies such as Shell are now building floating liquefied natural gas production systems which would reduce costs. But even high extraction costs can be economically viable because of the soaring value of fuel.

The price of crude has risen – from below $10 per barrel barely a decade ago to a current level of around $110 with predictions it could double again in the coming years, making exploration a highly attractive business.

Despite concerns about climate change, there is still rising demand for petrol and acrimonious debate about future fuel shortages and whether the world has already reached "peak oil" (the point at which oil production peaks before going into terminal decline). All of this makes oil deposits that are more difficult to reach financially viable.

"The low-lying fruit has been picked," is how Fadel Gheit, the veteran oil analyst at Oppenheimer & Co brokerage in New York, puts it.

The oil found in massive quantities just below the desert sands of Saudi Arabia or in the relatively calm waters of the North Sea has been used up or shut off by politics to Western oil companies.

This leaves oil companies to push the physical boundaries out into deep water, or the technical boundaries out into "unconventionals" such as the carbon-intensive tar sands, and environmentally sensitive areas such as the Arctic.

The pressures have increased for the Western oil companies because of resource nationalism, which has seen developing countries seeking to restrict developments for their own national oil companies.

A report written by the Norwegian green group Bellona said it was particularly concerned about Russian operations in the Barents, Pechora and Kara seas because much of the hydrocarbon equipment there is old and inefficient, environmental regulation lax and too little is known about the marine ecosystems in the region.

"An active growth of oil and gas exploration in the region may become a death sentence for its environment. The natural world of these northern seas is so sensitive and so vulnerable that even a slightest breach in its structure can lead to consequences no one will be able to reverse," the 2007 report concluded.

Arild Skedsmo, head of WWF-Norway's climate and energy programme, has more fundamental objections: "To avoid the worst consequences of climate change, we must phase out virtually all use of fossil fuel by 2050. This leaves very little room for any large-scale exploration and extraction of oil and gas in the Arctic."

Host governments in Russia to the US and Greenland are convinced that new supplies of hydrocarbons are needed – but say only if operations are conducted safely.

Cairn said it has put in place various precautionary measures to safeguard against an oil spill. The Edinburgh-based company had two drilling units in place so one could go to the assistance of the other in the event of a "blowout" or other problem. Equally there were 20 support vessels on hand at various times and it said that all the systems on the rigs were in line with the toughest international safety standards.

Cairn has taken legal action against Greenpeace to prevent it from disrupting its drilling and Watts was unwilling at the Knightsbridge conference to take questions from the conference floor, except those he defined as "technical" in nature.

When asked at the whether the financial and political fallout of an oil spill would not be disastrous for his company given the experience of BP in the Gulf of Mexico, he said: "We have a full safety regime in place. We are there at the request of the government. We have got an encouraging (drilling) response. Full stop," he replied.

But other technical experts attest to the difficulties posed by the many hours of daily darkness in the winter, the higher failure rate of steel materials in cold temperatures and the sheer difficulties posed by the remoteness of infrastructure.

Ove Gudmestad, professor of marine and Arctic technology at the University of Stavanger in Norway, also raises a host of potential difficulties, notably the suitability of existing oilfield equipment, oil and gas price uncertainty and troubled relations with local people in the Arctic.

Critics in the environmental movement who were not present at the Jumeirah Carlton Tower have more profound reservations and argue not nearly enough is known about the impact of a major oil spill in freezing waters.

"A single large oil spill in the wrong place and at the wrong time of year can have very serious, population-wide impacts on seabirds, fish and some marine mammals," said a spokesperson the WWF wildlife group.

"The problem is particularly acute in ice-infested waters: there continues to be no effective method for containing and cleaning up an oil spill in ice conditions."

The US government has so far put on hold plans by Shell and others to drill in the Beaufort and Chukchi seas following BP's Gulf accident. But Cairn has already started new drilling this summer and the Greenland government has pressed ahead with new offshore licence awards to major companies including Shell, ConocoPhilips and Norway's Statoil.

Ove Karl Berthelsen, Greenland's minister for industry and mineral resources, makes clear his country's motivation at a time when it is trying to break away from overall political control by Denmark: "The result of the licensing round is an important step towards achieving a sustainable economy for Greenland."

Meanwhile the Norwegian government, which already sanctions gas from the Snohvit field in the Barents Sea, has unveiled new plans to exploit its far north.

Industry watchers such as Richard Shepherd, chairman of the specialist oil consultancy, Petrologica, based in Edinburgh, believes there is a strong political momentum behind increased polar exploration that extends way beyond the boundaries of Greenland.

He says: "Arctic oil and gas is on the strategic agenda due to fear of energy dependence and fear of absolute shortages. Energy security is now synonymous with national security in the US – as it is with China". This, combined with rising prices means the pressure to exploit the Arctic's oil wealth will only increase.