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Ottawa opens huge arctic area to offshore drilling

May 18, 2012

The government of Canada announced that it would invite bids for 905,000 hectares in arctic offshore drilling. The bids are due in Sep-2012. This announcement will expand by 30% the area under lease in the Canadian arctic.

In 2007 Imperial Oil/Exxon bid $585 M for a large Beaufort Sea block. In 2008, BP bid $1.2 B for a block and Chevron bid $103M in 2010 for block.

In 2011, there were no offshore exploration wells drilled in the Beaufort Sea. Industry interest was onshore exploration in the central Mackenzie Valley. An important development for offshore explorers was the release by the National Energy Board (NEB) on December 15, 2011, of its report “Review of Offshore Drilling in the Canadian Arctic.” This was the culmination of an extended review initiated by the NEB shortly after the Deepwater Horizon disaster in the Gulf of Mexico. The report confirmed that drilling in the North can be done safely and that the NEB has the necessary tools to ensure the safety of both workers and the environment.

Two Calls for Bids closed on June 21, 2011, attracting industry interest in both the central Mackenzie Valley and Beaufort Sea/Mackenzie Delta regions. In a return to the Mackenzie Plain, industry was awarded eleven new exploration licences covering nearly nine hundred thousand hectares, north and south of the Norman Wells field, for a total work commitment expenditure of $534 million.

One new exploratory well was drilled in the central Mackenzie Valley and two new development wells were drilled in the southern Northwest Territories. Metres drilled in the North in 2011 totalled 5,236 m. Total exploration expenditures in the North in 2011 are provisionally estimated at $20 million out of total expenditures for exploration, field development and other well operations of $41 million.

Commentary

With gas prices so low it will be interesting to see what sort of bids are generated for these blocks.

Sources