Alaskan eyes ‘lit up’

Positive response to NWT minister’s suggestion of Canadian exports from Valdez

Gary Park

For Petroleum News

Arctic Gateway, a sweeping initiative to explore ways to move oil and natural gas from Alberta, the Northwest Territories, Yukon and Alaska to markets in the Asia-Pacific region, will likely be an underpinning of a standalone energy strategy being drafted in the NWT, said Industry Minister Dave Ramsay.

The objective is to complete the undertaking before the current NWT government ends its term of office in November 2015, he told Petroleum News.

The strategy could include recommendations for a pipeline down the Mackenzie Valley, breathing fresh life into the Arctic Gateway concept and giving the strongest push yet to the NWT government’s long-held dream of a transportation, energy and communications corridor along the river valley, including a fiber optic link and a possible all-weather highway, Ramsay said.

For now, “things are moving ahead on a number of fronts” in discussions with the Canadian jurisdictions and Alaska.

“We’re taking a run at putting together a strategy that is going to establish the foreseeable future for our oil and gas, onshore and offshore,” he said.

Tuk or Valdez

One of the key unresolved issues is whether the Arctic Gateway would establish an exit point for Canadian oil and gas at Tuktoyaktuk, north of Inuvik on the shores of the Arctic Ocean, or at Valdez.

During a summer meeting with Alaska officials, including Dan Sullivan before his November election to the U.S. Senate, Ramsay broached the possibility of shipping crude from Alberta and Northern Canada to connect with the underutilized trans-Alaska pipeline system.

“Their eyes lit up. ... If there’s a way to make that happen I think Alaskans would be interested.”

He said that once the work on the economic and technical feasibility of the Arctic Gateway is completed “maybe a determination can be made” on whether Tuktoyaktuk or Valdez is the better choice.

Mackenzie Gas Project groundwork

Ramsay agreed that much of the groundwork for a Mackenzie Valley pipeline was advanced during the years of planning and regulatory reviews for the Mackenzie Gas Project, which gained conditional endorsement from Canada’s National Energy Board, but has been shelved because of costs that have soared to C$20 billion and the shale gas supplies that have swamped the North American market.

He said that regardless of whether a Mackenzie Valley pipeline is proposed to carry oil or natural gas, the need is pressing for the economically challenged NWT.

“We have a multitude of resources and we need to find a way to get them to market. Having infrastructure in place would help our people and our economy. So we are anxious to continue the dialogue with Alberta, the Yukon and Alaska,” Ramsay said.

On the plus side, jurisdiction over onshore resource development was transferred to the NWT government earlier this year from the Canadian government, which has freed the NWT to embark on its energy strategy.

“The advantage that we have in the NWT is that we are now dealing with just one jurisdiction and not a multitude,” he said.

Aboriginal involvement needed

But he emphasized that there is no chance of any project moving ahead without an ownership role for NWT aboriginal governments, extending the precedent already set for a one-third equity stake for the Aboriginal Pipeline Group in the Mackenzie Gas Project.

Based on his own discussions with aboriginal leaders, “that’s an idea that is going to get some traction,” Ramsay said, while cautioning that the prospect of shifting to oil from gas “might get some backs up,” as it has with the crude bitumen pipeline proposals (Keystone XL, Northern Gateway, Trans Mountain and Energy East) in southern Canada and the United States.

“At the end of the day, our government has to balance the protection of the environment with providing economic opportunities,” he said, indicating that the NWT is not prepared to be diverted from its pursuit of new jobs and revenue sources.

“We cannot just sit back and hope it happens. We’re at a point now where we need to make things happen. A long-term vision and strategy has to be in place today,” Ramsay said.

“I know that some of the leadership in the Aboriginal Pipeline Group is trying to rally an effort if they are successful in getting the players to the table.”

If a precedent-setting agreement could be reached “that would set us apart from other jurisdictions when it comes to resource development,” said Ramsay, in an indirect reference to the opposition by First Nations that has stalled progress on the major crude pipelines.

Ramsay also noted that the NWT has not yet given up hope for the Mackenzie Gas Project based on discussions with the proponents in the Imperial-led consortium.

“We’re not ready to throw dirt on it yet,” he said. “We have to remain optimistic that (northern gas) will get to market eventually. The good thing about the Mackenzie gas is that it’s conventional and does not require multi-well fracking.”

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Small town, big prospects

But the obstacles are considerable and costly, Northwest Territories Industry Minister Dave Ramsay has cautioned.

An outline of the talking points around establishing a port has been made by Doug Matthews, a northern resource consultant for three decades who spent 25 years living in the NWT.

In a report that is part of a Base for the Beaufort Project, launched four years ago by the Inuvialuit Regional corporation, and an earlier speech, Matthews drove home the point that although the Beaufort may be on the “verge of something big ... the Beaufort doesn’t give up her riches very easily.”

Not that he rules out the chances of creating a deepwater port by reviving and reconfiguring ideas that figured large in the Beaufort’s exploration heydays in the 1970s and 1980s.

Matthews, in the pioneering spirit that has pried open doors to Arctic resource development, said it’s the “promise of doing something new, of facing the challenges, that has always made the Arctic such an exciting place to work.”

Channel dredging required

He said that Tuk’s harbor, although used extensively during the initial round of exploration, is too shallow and too small to handle the large vessels that would underpin deep-sea work.

Matthews’ report estimates it would cost C$100 million over four years to dredge a channel to connect the harbor with the Beaufort’s deeper waters — a process that he said would be “never-ending and very expensive.”

He said the long-defunct Dome Petroleum estimated in 1979 that the distance from Tuk Harbor to water depths of 10 meters was 37 kilometers and to depths of 17 meters was 51 kilometers.

In searching for answers, Matthews suggested that a standalone, purpose-built permanent structure could draw from Dome’s plans to establish an Artificial Production and Loading Atoll by using a Class 6 icebreaker capable vessel that would operate year-round in water depths up to 80 meters.

He said a second choice might be to expand on a company-owned permanent production facility located at a future producing field, such as the Amauligak field where Gulf Canada Resources struck oil in the 1980s and which could provide vessel handling services in 40 meters of water, about 50 kilometers from shore.

“Both models are today simply that — models — but as we move ahead over the next few years these and other ideas will be looked at,” he said.

Pipeline options

Ramsay said the NWT government is “anxiously awaiting the return of activity” to the Beaufort and hopes he will get some indication of industry plans when he meets with company executives in Calgary in mid-December.

He said the companies are “committed to drilling at some point and we see that as a positive step because ultimately the oil will need to get somewhere: If we can offer a way to move that resource that will make the whole Beaufort area much more appealing.”

The “big test” facing the license holders hangs on whether the National Energy Board is prepared to modify its requirement for same-season relief wells by accepting “equivalent” proposals by companies for dealing with oil spills, blow-outs or other mishaps, Ramsay said.

—Gary Park