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Calgary Leader: Check Fine Print on USGS' Arctic Report

Visions of Arctic bounty were resurrected by the U.S. Geological Survey (USGS) in a new report this summer on northern natural gas and oil prospects. But Canadians who have labored to make the dreams come true emphasize the fine print in such projections, which invariably admit there is many a slip between the resource cup and the production lip.

"Even with climate change the Arctic will continue to be a challenging operating environment -- nothing is ever going to be easy," says a paper dedicated to injecting realism into the northern energy wealth gospel by a Calgary leader of the Canadian Gas Potential Committee. Author Bob Meneley is in a position to know. He has professional degrees in geology and engineering, and used both to lead hybrid industry and government Arctic drilling expeditions for more than 10 years at the height of the last outbreak of northern enthusiasm in the 1970s and '80s.

The USGS's new Circum-Arctic Resource Appraisal estimates that gas and oil equivalent to 240 billion bbl await industry in the 5.8 million square miles of the globe north of the Arctic Circle -- or beyond 66.6 N latitude, in the land of the midnight sun, where 24-hour summer days alternate with 'round-the-clock winter nights (see NGI, July 28). The resource endowment is estimated to be 63% gas, or 1,668 Tcf.

In the fine print below the headline numbers that caught the eyes of commodity traders, stock brokers and pro-development politicians, the USGS added that "no economic considerations are included in these initial estimates." The report said "results are presented without reference to costs of exploration and development, which will be important in many of the assessed areas."

The fine print is certainly right, Meneley's paper suggests. He reviews the record in one of the best explored areas included in the USGS assessment, the Arctic Islands region where Canadian drilling probed vast sedimentary rock formations known collectively as the Sverdrup Basin to earth scientists. He ventured into the area for Imperial Oil, Petro-Canada and the Panarctic Oils consortium of multiple corporate mineral rights owners and Canada's federal government.

The legacy of the expeditions is a Canadian estimate that the discovered resources alone in the Sverdrup add up to 19.8 Tcf of gas and 1.9 billion bbl of oil. But the results also include knowledge that Arctic reserves occur in geological ways that make economic production difficult, apart from the obvious obstacles of remoteness and severe climate.

Even the two largest gas discoveries, Drake Point and Hecla, are not easily tapped natural storage tanks. "These fields have thin gas pays but cover very large areas," Meneley writes. At the sites of other drilling successes, "a dominant characteristic is that the gas column is limited to about 600 feet or less. As a result the structural traps are dramatically underfilled. In many cases only 10% of the trap capacity is occupied by hydrocarbons."

As often happens in exploration, in the Sverdrup the formation that ignited much of the initial enthusiasm turned out to be much better in scientific theory than industry practice. "The Arctic fold belt, which attracted so much of the early attention, has proved to be a spectacular failure from a hydrocarbon accumulation standpoint," Meneley writes. Of 23 wells drilled into that 90,000-square-kilometer (36,000-square-mile) zone, 11 diagnosed the rock as potentially productive, five had mixed results and seven came up empty-handed. From the industry perspective of whether the deposits might be big and flow freely enough for economic production, the region was a disappointment. "Lack of effective porosity and shows in these tests severely downgrade the prospects for major hydrocarbon accumulations," Meneley reported.

"Pronouncements of large undiscovered hydrocarbon resources in the Canadian Arctic are not supported by the exploration history to date. New exploration concepts will be required, and such new plays will have inherently high risk attached to them."

"Interest in the high Arctic is increasing due to melting of the ice and the perception that this will make the area more accessible for exploration. Reports of bountiful undiscovered resources of oil, gas and minerals are rampant in press and government pronouncements."

In a veteran's eyes, the current enthusiasm is more of a variation on an old theme than a new phenomenon. In the Canadian industry's initial growth period following the Second World War, as now, "prospects of giant Middle East-scale oilfields danced in the heads of promoters. The presence of giant oilfields was viewed to be an absolute certainty," Meneley recalled.

The 1968 Prudhoe Bay discovery fueled a thorough hunt that made the Sverdrup "the site of one of the most successful and comprehensive exploration programs conducted in the frontier basins of Canada," he pointed out. The venture is remembered as a feat of industrial creativity that established large-scale operations in an area 2,400 km (1,500 miles) northeast of Anchorage where the closest settlement -- Resolute Bay, population 250 -- is still 300 km (190 miles) from the gas discovery area.

In two decades since the drilling campaign petered out, "all the productive wells have been permanently abandoned. The Panarctic infrastructure of bases and airstrips has been dismantled. The men and women with Arctic experience have largely died or retired. New explorers will have to start over again," said Meneley.

The widely forecast shrinkage of Arctic ice caps due to global warming would not make a second northern exploration any easier, Meneley added. The main projected effect, open water making the Northwest Passage across the top of Canada passable, is only helpful for ships -- and definitely no help to industrial operations.

The Sverdrup exploration campaign included mastering the Eskimo art of using ice for a construction material on the industrial scale of building roads, airstrips and artificial drilling islands. "Ice was our friend. It made the offshore accessible for exploration," Meneley recalled. "Current ice conditions would be much more difficult."

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