Drilling and completing wells in arctic areas pose many challenges, one of which is the tendency of permafrost to slowly thaw with production and cause wellbore integrity issues in later well life. With arctic exploration moving offshore, ensuring the integrity of the well for the productive life of the field is becoming even more crucial, as a well failure can potentially threaten to close down an entire production facility. Arctic permafrost is an example of an environment that can be disturbed during normal production operations due to heat transfer. Insulating the wellbores is a desirable practice; however, in many cases a suitable technology is either not readily available or not economically viable. Placing an insulating fluid in an annulus can be a practical and sustainable solution. Insulating fluids have been deployed in some cases but for various reasons, results have been less than satisfactory. This paper presents results of laboratory studies of a novel, 100% base oil system that provides sufficient viscoelastic yield stress to prevent convective heat loss though an annulus. The rheological properties necessary to reduce heat loss is achieved with this fluid at temperatures up to 150 °C. This viscoelastic property is obtained without the need for cross-linking agents that require complex mixing procedures and are sensitive to contamination. This paper also compares heat transfer properties of various packer fluids such as base oil, brine, viscosified brine and this novel gelled system. The ability to eliminate convective heat loss in combination with its intrinsic low thermal conductivity means that this fluid is an excellent candidate as an insulating packer fluid.