Canada’s first northern deepwater exploration well is at least six years away, the national inquiry into Arctic offshore drilling safety has been told.
At information sessions held by the roving review in the Mackenzie Delta capital of Inuvik, Chevron Canada disclosed that preparations are under way for a new foray into the Beaufort Sea. Preliminary seismic surveys are scheduled to begin as early as the summer of 2012 on a drilling lease that Chevron obtained from Canada’s government last year (see Daily GPI, Aug. 9, 2010).
But Chevron predicted that the earliest possible time for a rig capable of enduring the rigors of Beaufort operations to go to work is likely 2017. First comes extended planning by a “global arctic center” that the international company has set up in Calgary to work on Arctic offshore projects in Alaska, Greenland and Russia as well as Canada, the safety review was told.
The loose schedule leaves plenty more time for the marathon inquiry to reach conclusions. The safety review has entered its second year, with the National Energy Board (NEB) providing a traveling forum for scores of interventions by industry, government, academic, environmental and aboriginal organizations.
Although no formal Arctic offshore drilling applications have been filed with Canadian authorities, the inquiry is rooted in anticipated industry activity. The case began in 2009 as a technical review of a requirement dating back to 1976. The old regime requires Arctic offshore exploration teams to ensure that relief wells can be drilled in the same northern summer work season that any blowouts occur.
The starting point was a request by Imperial Oil Ltd. to bring the old rule up to date, prior to a planned application for a permit for a well by a new generation of deepwater Arctic drilling hardware. A team exploration effort was in the works for extensive Beaufort leases held by Imperial, its 70% owner ExxonMobil Corp. and BP plc. At the same time, ConocoPhillips Canada was also showing interest in reviving Beaufort drilling, which had been halted by poor energy prices in the mid-1980s.
The natural gas that dominates discoveries in northern Canada to date is prone to be rich in liquids, which fetch price premiums over even the best grades of oil.
The Mackenzie Gas Project includes a liquids extraction plant at Inuvik and a dedicated pipeline to ship them 457 kilometers (274 miles) south to the northern inlet of the Enbridge oil network at Norman Wells. The plans call for deliveries to start at 25,000 b/d. The line would be laid with built-in capacity for volumes to more than double by adding pumps.
The technical offshore safety review escalated into a full-blown public inquiry during the 2010 blowout at BP’s Macondo well in the Gulf of Mexico, with all concerned vowing not to repeat the mishap in Canadian waters.
Neither the NEB nor any participating government agencies have set deadlines for completing the safety studies and incorporating the results into new regulations.
At the Inuvik information sessions, Chevron boiled the regime desired by the industry down to a simple regulatory requirement: “In the event of a loss of well control to stop the flow of hydrocarbons and safely secure the well within the same operating season.” The company urged the inquiry to opt for a “goal-based approach” in the Arctic by adopting a pattern followed by much oil, gas and pipeline regulation elsewhere in Canada. The regime sets performance targets then leaves ways to hit them up to industry, subject to disclosures, approvals and inspections.
The industry has proposed a variety of alternatives to relief wells, saying blowout control technology has advanced considerably since the 1970s. Current engineering methods of capping sea-floor runaways “offer significantly decreased flow duration relative to a same-season relief well — several days or weeks, versus months,” Chevron promised in Inuvik.
While environmental groups such as the World Wildlife Fund and Sierra Club voice big doubts, northern aboriginal communities are keeping open their doors to a resumption of Canadian arctic exploration. High levels of co-operation and employment were reached by 1970s and ’80s drilling campaigns.
At the Inuvik safety inquiry sessions the president of the Canadian chapter in the international Inuit Circumpolar Council, Duane Smith, indicated that the aboriginal attitude has not changed. In hindsight, the initial northern drilling rushes had a positive side of prompting Inuit to organize, successfully pursue land claims and achieve greatly enhanced self-government on their own territory in particular and influence in northern politics generally, Smith recalled.
A summer meeting of the international council adopted a “Declaration on Arctic Resource Development,” which stopped well short of calling for outright prohibition in the name of environment or community preservation. The “key principles,” said Smith, spell out that “Inuit welcome the opportunity to work in full partnership with resource developers and governments in sustainable development of resources.”
The requirements add up to decent corporate citizenship: “All resource development must contribute actively and significantly to improving Inuit living standards. Those who face the greatest impacts must have the greatest opportunities and a primary place in decision-making.”
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