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Arctic future at risk; Imperial wants NEB to expedite ruling
Imperial Oil and its sister company ExxonMobil Canada can’t buy a break from Canadian regulators as they mull their future plans for the Arctic.
And Imperial has vented its frustrations in a letter to Canada’s National Energy Board, warning that the latest hitch raises questions about the “attractiveness of investing in Canada’s North.”
Stalled on one hand by a drawn-out decision-making process for the Mackenzie Gas project they now face another obstacle in the Beaufort Sea.
The NEB has told the joint partners in a Beaufort exploration program their request for an advance ruling on drilling plans has been stalled.
Application for early verdict
Imperial had applied to the federal regulator to get an early verdict on “same-season relief well” capability in the Beaufort.
In a Nov. 19 letter, the NEB said it has decided the application will be considered as part of a generic policy review that will be conducted by way of a written process.
Imperial geosciences manager Michael Peacock replied that Imperial, although welcoming the NEB’s decision to undertake a comprehensive review of the same-season relief well policy, is “very concerned” that Imperial’s application will have to await the review results.
He said that has “very serious implications” for Imperial’s ability to meet the terms of Exploration License 446, which was awarded to Imperial and ExxonMobil in mid-2007, after the two companies made a joint work commitment of C$585 million to secure exploration rights to 508,000 acres.
Peacock said the restricted Beaufort drilling season could remove an entire year from the nine-year license.
He noted that Imperial has so far spent C$150 million on its plans for a well, including the acquisition of 3-D seismic and engineering for a new Arctic drillship, which is now ready for a corporate decision to proceed with construction.
The Imperial response said the “continuing regulatory uncertainty introduced by the delay in our SSRW application increases the risks associated with these investments.”
“Deferral of the additional investment to allow for the comprehensive policy review by the NEB will jeopardize Imperial’s ability to procure the Arctic drillship, obtain the necessary permits, drill an exploration well and conduct the formal evaluations necessary to make an application for a Significant Discovery License before the EL 446 expires in October 2016.”
Importance of timely consideration Peacock said Imperial made every effort to update the NEB on the importance of timely consideration of its same-season relief well application.
In blunt terms, he told the NEB the delay “would further increase the costs and add to the already onerous inhibitions to development of Canada’s Arctic resource.
“A one-year drilling delay to accommodate this policy review will add an additional year of overhead costs and project delay costs. …”
“This will be viewed by the industry and northern stakeholders as another example of the regulatory system slowing down development and will further reduce, from a global perspective, the attractiveness of investing in Canada’s North.”
Imperial has urged the NEB to apply its mandate and deal with the company’s SSWR application without waiting for completion of the review.
To date, Imperial and ExxonMobil have remained coy about their plans for the Beaufort, beyond insisting from the outset that the substantial work commitment is separate from the lead roles in the Mackenzie project.
They have given no indication whether they view the exploration license area as an oil or natural gas target.
However, Devon Canada reported in fall 2007 it has made the first oil discovery in 25 years in the Canadian Beaufort on Exploration License 420, south of the Imperial-ExxonMobil property, estimating the recoverable oil at 240 million barrels.
—Gary Park
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