After surviving the shale gale, the aborted northern pipeline race and the 2008-2009 recession, the vision of Arctic wealth awaiting drilling beneath Canadian waters of the Beaufort Sea is also outlasting the current natural gas and oil price slump.
Ron Wallace, a National Energy Board (NEB) member, told an annual winter northern industry symposium in Calgary that the agency will be ready to embark by fall on the first scheduled step toward deepwater drilling offshore of the Mackenzie Delta.
“Despite a number of projects in the Arctic being delayed or ‘put on ice,’ the NEB continues to work to ensure we are prepared,” Wallace said. “It is worth noting” that not all the Canadian industry has frozen long-range northern plans, he added.
Chevron Corp. suspended Beaufort drilling proposals. But a partnership of Imperial Oil Ltd., its 70% owner Exxon Mobil and BP is so far sticking to a schedule that calls for an initial application to be filed with the NEB in September or October.
The first step would be a technical exercise in engineering, safety precautions and risk management. New, as-yet untested NEB standards enable Arctic gas and oil hunters to devise substitutes for a former ironclad requirement: same-season relief well capability.
The old rules stipulated that Beaufort programs had to guarantee a second well could be completed during the brief northern summer open-water work season to siphon off any gas or oil blowout from exploration drilling.
The new standard accepts industry submissions that the relief well guarantee was impossible and lets companies devise equivalent combinations of equipment and procedures. The rule change followed a public inquiry into Arctic operations that took into account lessons of the 2010 BP Macondo well blowout in the Gulf of Mexico.
A 455-page project description by Imperial calls for the next Arctic exploration era to start at an offshore site called Ajurak, 125 kilometers (75 miles) northwest of Tuktoyaktuk, where the Beaufort is up to 1,500 meters (4,920 feet) deep.
In the deepwater target area, air temperatures average 10 degrees C (50 degrees F) during the warm months of the 24-hour midnight sun. The Beaufort heats up just enough to break up and thin out the Arctic ice pack.
But winters feature long spells of darkness at noon and severe storms, with the temperature averaging a bone chilling minus 27 degrees C (minus 17 degrees F). Seawater congeals into mobile floes of variable thickness formed by complex interactions of winds, currents and waves. Even mighty icebreaker ships can be overwhelmed and stuck or forced off safety standby stations.
A 2020 target date has been set for the first deepwater Beaufort exploration well. But the commitment is not firm. The oil and gas companies have yet even to venture a guess when production might begin if they strike it rich. Nor have any disclosures been made about the size and nature of the deepwater Arctic geological quarry.
The only other active northern Canadian exploration program, a land expedition into the central Mackenzie Valley, has been placed in limbo. After completing two trial horizontal wells with hydraulic fracturing into the oil-bearing Canol Shale formation near Norman Wells, ConocoPhillips Canada has halted drilling without setting a date to resume work.
An application has been made for a Canol “significant discovery license.” If granted, the permit lets the company retain its rights indefinitely, until market conditions are ripe for a production development. The procedure also enables northern gas and oil explorers to avoid attracting rivals by keeping details of the find secret.
Northern Canadian economic boosters continue a long tradition of portraying the Arctic as an untapped supply of future natural resource wealth on a giant scale. Visions of a northern pipeline, which date back to the 1960s, also persist. Northwest Territories Premier Robert McLeod is canvassing his southern Canadian counterparts, as well as industry, for support for a northbound “Arctic gateway” pipeline to carry Alberta oil and liquids production to a Beaufort tanker terminal, as an alternative to proposed routes across British Columbia to the Pacific Coast, which have run into stiff environmental and native resistance.
The NEB recognizes Arctic development possibilities by keeping open remote offices in the territorial capital of Yellowknife and in the chief town of the Mackenzie Delta, Inuvik. Board Chairman Peter Watson has embarked on periodic tours of the region for consultations with political, civic, aboriginal and territorial regulatory leaders.