The last great frontier for the world’s energy companies is the great bounty that lies beneath the often-frozen seas of the Arctic region.
According to the U.S. Geological Survey, the region above the Arctic Circle holds about 13% of the world’s undiscovered oil (approximately 90 billion barrels) and roughly one-third of the globe’s untapped natural gas.
At least three-quarters of these rich deposits are offshore. And one area in particular that has generated the most interest in the Arctic is Canada’s Beaufort Sea.
Canada’s Beaufort Sea
Energy consultancy Wood Mackenzie says that the Canadian Beaufort Sea could contain as much as five billion barrels of oil equivalent.
It’s what led BP PLC (BP) to bid $1.2 billion in 2008 for the right to drill 6,000 square kilometers.
Now, interest there cooled thereafter, as the Canadian government imposed strict rules in 2011 on offshore drilling (directly as a result of the BP Gulf spill).
These regulations include assurances from any oil company drilling there that it will be able to provide a “same work season relief well” in the event of a blowout. It was a relief well that finally ended the BP Gulf spill disaster.
Keep in mind that the work season in the Arctic can be as short as only 100 to 120 days. So, in effect, two wells have to be drilled roughly simultaneously.
So it’s not surprising that progress in the Arctic has been, well… glacial – with Canadian regulators yet to receive an application to drill since the new rules were imposed.
However, with higher oil prices, better drilling technology and a “warmer” Arctic climate, interest in the region is kindling once again…
Imperial Oil First on the Scene
It’s the lead company that will operate in the combined Beaufort Sea lease holdings of Exxon, BP and Imperial.
The project is expected to cost at least $10 billion. But the expected payoff is a yield of a billion barrels of oil.
The project will be technologically challenging, since Imperial wants to drill the deepest well ever in the Arctic – at over six miles deep.
Of course, getting approval will face major hurdles.
For example, Imperial has already said it will not be able to provide a relief well during the same season. Instead, it said it will apply for a policy exemption.
Imperial will present alternative approaches to stopping any blowout besides a relief well to Canada’s National Energy Board (NEB) later this year.
Even if granted approval, the Imperial drilling project in the Beaufort will take three “seasons.” And it will likely be the most expensive well ever drilled.
It will be interesting to see if Imperial gets the go-ahead next year from the NEB over environmental objections.
I’ll keep readers informed of any further progress made on energy’s final frontier.
And “the chase” continues,