Canada’s federal energy regulator is seeking public input to its upcoming review of Arctic offshore drilling, while the Newfoundland government, the only province where offshore drilling is currently taking place, is fending off pressure to require a relief well to accompany the exploration phase.
In addition to its own review, the National Energy Board will station an inspector in Greenland to oversee a summer drilling program in the iceberg-infested David Strait, Environment Minister Jim Prentice said.
In establishing the terms of reference for its Arctic review, the NEB said public presentations would have equal status to those of the industry during what it expects will be a combination of community sessions and technical workshops.
A deadline of July 16 has been set for participants to register. The final timetable and format has yet to be released.
Although no drilling is scheduled for Canada’s Beaufort Sea, a partnership of Imperial Oil and ExxonMobil Canada, as well as BP have been in the preliminary stages of seeking permits for exploratory wells.
Scott Gedak, the NEB’s project manager for the review, said time is needed to “set up a broad review of this nature and we want to take advantage of this lead time to get things ready to go. When that information is available we will be ready to discuss it with both the industry and the public.”
Information, lessons learned
The review will consider what information a company will have to provide before it is allowed to start drilling in the Arctic, including how it will respond to accidents and emergencies when they happen.
It will also consider what lessons can be learned from major spills, such as BP’s Macondo blowout in the Gulf of Mexico, and how they could be applied to northern drilling.
Northwest Territories Premier Floyd Roland said he is eager to see drilling eventually take place in the Beaufort, but first wants to be certain the resources are in place to handle a spill and to understand what happened in the Gulf.
“We need to be shown that the technology could work in Arctic conditions,” he said, noting that his government wants to build an economy in a sustainable way.
Chris Feltin, an analyst with Macquarie Securities Canada, said a “whole lot of ‘what-if’ scenarios” are doing the rounds these days, pointing to tighter scrutiny for offshore operators.
But so far, he said, there has been no sign of downward pressure on the share values of Canadian-based companies with both domestic and foreign offshore operations, such as Nexen, Suncor Energy, Canadian Natural Resources, Husky Energy and Talisman Energy.
Feltin said there has been no pullback or weakness “in step with what we’ve seen in the United States, but we anticipate that offshore producers globally will see higher insurance premiums and delays in project timelines.”
Greenland wells close to Canada
Prentice, although concerned that Scottish-based Cairn Energy will drill two wells in Greenland waters close to the Canadian coastline, said he is “impressed with the amount of work the Greenlanders have done and that they are determined to enforce the highest possible environmental standards for Arctic drilling.”
Greenland has adopted Norway’s offshore regulations, considered among the most stringent in the world.
It has also agreed to work with the NEB as its own regulators conduct frequent inspections of the Cairn activities.
Prentice said the fact that two rigs will be drilling this summer means one can immediately be switched to drilling a relief well if a blowout occurs, a process he estimates would take about a month, given the fact that the drilling depths being targeted are shallower than those in the Gulf of Mexico.
Newfoundland well under way
With a Chevron Canada-operated well under way in Newfoundland’s Orphan basin, Premier Danny Williams said he has no intention of imposing a moratorium on offshore drilling.
“I think we are doing everything we can in the province of Newfoundland and Labrador to prevent similar occurrences (to the BP disaster),” he said.
Lorraine Michael, leader of the opposition New Democratic Party in the Newfoundland legislature, is putting constant pressure on Williams to listen to more than the industry when considering how prepared the industry is to handle blowouts and subsequent spills.
Williams said he has met with executives of both Chevron and Husky “cross-examining, for want of a better term (the companies), on what they were doing and what initial procedures were in place I did satisfy myself (that Chevron) was in fact implementing a lot of safeguards even before the Gulf of Mexico” blowout.
He said that drilling a relief well now in the Orphan basin would add dramatically to the cost of the project and could put an end to further exploration in the basin.
Williams said his government will not take the risk of potentially losing billions of dollars from offshore development that it uses to fund social programs.
Chevron: ‘top-to-bottom’ review
Michael MacLeod, Chevron’s Atlantic Canada manager, told a Canadian Senate committee that the Lona O-55 well, which has been drilling for the past month, would not have been started unless his company was confident it could do the work safely.
However, since the BP rig exploded, Chevron has conducted a “top-to-bottom review of what we’re doing. We have modified equipment, we have added equipment to the Stena Carron (drillship), we’ve done additional tests on our casing program, our cementing program.”
“The operation program for the BOP (blowout preventer) has been thoroughly reviewed in light of the April 20 incident in the Gulf of Mexico,” he said.
MacLeod said Chevron has added an extra remotely operated vehicle to the drillship that could be used to activate the BOP in an emergency and shut down the well.
He said that vehicle has been equipped with a larger hydraulic fuel tank allowing it to activate up to four shutdown valves on the BOP.
MacLeod and the Canada-Newfoundland and Labrador Offshore Petroleum Board agree the Lona well has so far been incident free.
MacLeod said Chevron encourages employees to stop any work they consider unsafe and rewards them for doing so.
