Northern Exploration Picks Up Speed

While three top Canadian producers move forward on tapping natural gas reserves on the Mackenzie Delta and designing a pipeline to bring it to market, the first step is being taken towards reopening drilling much farther north. For the first time since the Prudhoe Bay discovery ignited an exploration rush on the top of the world in the 1960s and '70s, the vast Sverdrup Basin in the Arctic Islands is being offered to gas hunters.

On behalf of the new Nunavut Territory of the eastern Arctic, Indian and Northern Affairs Canada issued a call for the industry to make "nominations" or selections of drilling prospects to be sold at an auction in the new year. The invitation covers about 127,600 square miles, a territory half the size of Alberta made up of frigid ocean, year-'round ice, rich wildlife habitat and a sparse population of Inuit.

At the same time, Imperial Oil Ltd., Shell Canada Ltd. and Mobil Canada extended their previously announced study into exploiting their Mackenzie Delta gas reserves. The companies said that after feasibility studies of potential production developments for about 6 Tcf of gas reserves on land on the Delta they will commission more conceptual engineering work and start collecting environmental data in the new year. The companies also have about 6 Tcf of discoveries in nearby shallow waters of the Beaufort Sea. A total of 9 Tcf of reserves have been discovered in the Delta area, and the National Energy Board estimates 55 Tcf of reserves remain undiscovered in the region.

The trio set a target of at least to beginning work on a regulatory application for production development and a pipeline in 2001. An Imperial Oil spokesman pointed out that a relatively small amount of greenfield pipeline construction would be required for the Mackenzie Valley route because Enbridge already operates an oil pipeline that extends 540 miles from Imperial's crude production in Norman Wells in the Northwest Territories south into Alberta. The greenfield construction would occur from Inuvik in the Mackenzie Delta to Norman Wells, which is only about a 300-mile stretch.

So far, the companies have reported encouraging results from a pioneering effort to form a business alliance with northern native organizations. Imperial's senior vice-president in charge of its Calgary-based exploration and production arm, K.C. Williams, indicated the companies are intrigued by northern overtures for native ownership of a pipeline. Williams said "our relationship with the Aboriginal Pipeline Group has been highly beneficial..... We are further encouraged that we will be working more directly with the APG in 2001 to determine mutually acceptable arrangements under which a Mackenzie Valley pipeline could proceed."

Similar hopes of a breakthrough in native relations - a key factor in stopping the last northern gas hunt long before the 1970s and '80s price slumps - are being raised farther north in Nunavut. In extending the invitation to a drilling prospects sale, the federal government stressed that it has support from northern native authorities. The move was made possible by completion of a Nunavut Land Claims Agreement that clarified territorial rights and the requirements that Arctic native authorities intend to establish for industry. The invitation included endorsements by the Nunavut government and the native organization responsible for implementing the claim settlement, Nunavut Tunngavik Inc. The territorial Minister of Sustainable Development, Olayuk Akesuk, declared, "This call for nominations marks the start of a new era of exploration in one of Canada's largest and least explored sedimentary basins."

At the same time, the Inuit and federal authorities reminded the industry that rather than being entirely virgin territory, the Arctic Islands already recorded tantalizing results and established a decent success rate for wildcat frontier exploration. Of 160 wells drilled in the region in the 1960s, '70s and early-'80s campaign, one of every six resulted in discoveries. By the National Energy Board's count, the Arctic Islands are already known to harbour 10% of Canada's known remaining conventional crude oil and 23% of the nation's gas endowment. Like the Delta-Beaufort region, the Arctic Islands have proved to be richest in natural gas. While far from economic reach by tankers or pipelines, the remote discoveries include two of the largest undeveloped gas fields within Canada's boundaries.

Although only the forthcoming auction will provide a reliable gauge of interest in reviving far northern exploration, industry sources point out that a vehicle for starting it up again still exists. The Panarctic Oils consortium, while dormant since completing an 11-year series of successful experimental tanker shipments to Montreal in 1996, still exists in an office run by a part-time caretaker administration across a downtown Calgary street from the headquarters of its majority owner, Petro-Canada.

At the height of the first Arctic Islands exploration campaign, Panarctic filled a Calgary office tower of its own and dispatched field hands and heavy equipment to work sites within 1,600 kilometers of the North Pole.

The consortium's celebrated leader, the late Charles Hetherington, presided over an 800-employee army of visionary geologists, drilling specialists and engineers. They crafted ambitious schemes for producing and delivering Arctic resources as well as pioneering techniques for conducting industrial work year-'round in conditions that still keep out all but a handful of the hardiest sportsmen, adventurers and scientists.

The gigantic expedition refined techniques such as airlifting heavy oilfield gear and drilling offshore from man-made islands that were artificial icebergs. The lessons of the first far northern oil and gas campaign remain preserved on industry shelves and in vast archives at the Arctic Institute or North America, quartered on the campus of the University of Calgary. Much of the activity was financed by federal incentive programs.

Petro-Canada acquired its Panarctic stake in 1975 as heir to direct government involvement in the resource hunt, doubling as an assertion of potentially contested national sovereignty. At the height of the Panarctic campaign, which coincided with oil and gas price peaks in the "energy-crisis" era of perceived global shortages, Hetherington succeeded in securing extensive financial backing from corporate giants in the United States. In the end, for expenditures of $750 million to drill 174 wells, Panarctic estimated that it found 310 million barrels of oil and 17.3 Tcf of gas.

Petro-Canada and the rest of the Panarctic consortium remain far from giving any sign that they intend to revive it. But the northward march of the Canadian industry is continuing, with Petro-Canada dispatching a purpose-built rig to the Delta this winter via ice roads to drill the first exploratory well there in recent memory.

Gordon Jaremko, Calgary

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