Best in the west

With so much attention focused on offshore Greenland and eastern Arctic development, Atlantic Canadian companies seem to forget opportunities are rapidly expanding in the western Arctic. However, at least one expert is warning that those who ignore those western opportunities do so at their own economic peril.

“I think western Arctic opportunities are . . . beginning to surpass opportunities in eastern Arctic and offshore Greenland,” said Keith Dewing (picture right), a research scientist with the Geological Survey of Canada and leader of a team of government scientists studying where Canada’s most promising energy reserves might be.

Dewing says he believes companies would feel more inclined to work in the western Arctic rather than the eastern Arctic because the knowledge of the geology seems much better. “In the western arctic there have been about 253 holes drilled in the Mackenzie Delta area alone. In the eastern Arctic there just aren’t that many.”

“Logistically it would be easier. I mean people are used to living there and there’s more familiarity,” said Dewing. “Plus, there’s a longer ice-free period, and the icebergs are much smaller.”

The western Arctic includes much of the Northwest Territories and adjacent Arctic offshore, an area estimated to contain more than half of the recoverable petroleum in northern Canada, with the Beaufort-Mackenzie Basin being the largest potential contributor.

The project undertaken by GSC will have three field programs: on Victoria Island and in the subsurface on the north side of the Sverdup Basin, on the Sabine Peninsula of Melville Island and on Ellef Ringnes Island.

ConocoPhillips has been one of the principal players in the Mackenzie Delta and Beaufort Sea areas since the late 1960s and is the operator of the Parsons Lake and Amauligak discoveries. The company holds interests in 45 significant discovery licenses. At the end of 2010, the total leasehold for the region exceeded 1.5 million gross acres.

In the Mackenzie Delta area, major gas fields at Taglu and Parsons Lake, together with the large Niglintgak field, are proposed for development by the Mackenzie Gas Project. Combined resources in those fields are estimated by the proponents at 161 x 109 m3.

The Umiak Field is also located in the Mackenzie Delta, 120 km northwest of Inuvik. Umiak is the fourth-largest discovery onshore Mackenzie Delta. Plans to commercialize this discovery will be linked to the progress of the Mackenzie Gas Project and its infrastructure development.

Then there’s Amauligak, the largest oil and gas field in the Mackenzie Delta and Beaufort Sea areas. It lies approximately 50 km offshore in shallow water. A range of possible development options are being evaluated. In 2010, ConocoPhillips acquired an additional 1.4 per cent interest in Amauligak.

“In June and July, there were a series of land sales just west of Norman Wells that went for over $500 million,” said Dewing. “Within the next five years, Husky Energy and other owners plan on doing some seismic studies and they plan to begin drilling. They’re looking for conventional natural gas and oil.”

Dewing says there has been drilling in the ‘70s and ‘80s in the Beaufort Mackenzie Delta area. “People proposed a pipeline in the ‘70s to get the gas to the southern market. But more recently there have been land sales in the shallow area,” he said.

On December 16, 2010 the National Energy Board approved the applications for the construction and operation of the Mackenzie Gas Project which proposes to build a 1,196-kilometre pipeline system along the Mackenzie Valley.

It would link northern natural gas producing wells to southern markets. The main Mackenzie Valley Pipeline would connect to an existing natural gas pipeline system in northwestern Alberta. The natural gas exploration and development companies involved in the Mackenzie Gas Project have interests in three discovered natural gas fields in the Mackenzie Delta: Taglu, Parsons Lake and Niglintgak. Together, they can supply about 800 million cubic feet per day of natural gas over the life of the project.

Other companies exploring for natural gas in the North are also interested in using the pipeline. In total, as much as 1.2 billion cubic feet per day of natural gas could be available initially to move through the Mackenzie Valley Pipeline.

“The main activity seems to be in the deepwater where there were land sales in 2008-09. ExxonMobil bid $585 million to get a block of land in that area, the following year BP and Chevron paid $1.8-billion next door.”

Dewing says work done by some of the scientists suggests they’re drilling for oil rather than gas. “It’s just a guess, but I think they’re drilling for oil. One of the scientists here believes the rocks would be oil-proned that far out because of how deeply they would be buried.”

Dewing says that would explain why the companies paid so much for those land sales.

In August 2011, the Bureau of Ocean Energy Management, Regulation and Enforcement approved a 2012 Beaufort Sea exploratory drilling plan for Shell Offshore, Inc., a decision long awaited by the oil company, which saw its plans put on hold in the regulatory aftermath of the Gulf of Mexico’s Deepwater Horizon oil spill in April 2010. Shell’s plans in the Beaufort Sea call for drilling up to four exploratory wells over two years. The company is also pursuing drilling along Alaska’s western Arctic Coast in the Chukchi Sea under a separate permit.

Most recently there were calls for nominations in the Central Mackenzie Valley. The closing date was January 31, 2012. From the level of activity, it’s evident that a lot of major players believe the western Arctic holds huge potential for future discoveries.

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