Minnow swims with Beaufort whales

Franklin Petroleum only bidder in Canadian Beaufort Sea/Mackenzie Delta round; has assembled 2.7 million acres; plans seismic

Gary Park

For Petroleum News

It needed Franklin Petroleum — a little-known, two-employee, privately held United Kingdom company — to prevent a total industry cold shoulder of exploration rights in this year’s Canadian Beaufort Sea/Mackenzie Delta bidding round.

But the overriding message is that companies have decisively pulled back from the region after making heavy work commitments in recent years and turned their attention from the Arctic region to the liquids-rich prospects in the Central Mackenzie Valley of the Northwest Territories.

Franklin, in expanding its northern foothold, made a successful bid of C$7.5 million for a 100 percent interest in more than 2.2 million acres of parcels, the Canadian government’s Aboriginal Affairs and Northern Development Department reported.

The company has now assembled about 2.7 million acres in the Beaufort, making it one of the biggest players in the Canadian Arctic.

The Canadian government is “not required to issue an interest” based on its Call for Bids, but a spokesman for John Duncan, the federal cabinet minister in charge of the bidding process, said “it’s a market-driven competitive process and there would have to be a compelling reason (to reject the top bid), otherwise we undermine the process.”

But the results this year and in 2011, when the only successful Beaufort/Mackenzie bid was C$2 million for six parcels covering a combined 5.22 million acres from Arctic Energy & Minerals Ltd., also a low-profile player, which transferred the rights to Franklin.

Sharp contrast to 2008

The slide started after 2010 when Chevron Canada was awarded a 100 percent stake in a 5.08 million acre parcel for a bid of C$103 million and junior explorer MGM Energy committed C$5.69 million for four licenses totaling 7.18 million acres.

At the same time the Central Mackenzie came into focus, attracting C$536 million in winning bids in 2011, led by Husky Energy’s commitment of C$386 million for two parcels, while last year’s sale saw Shell Canada secure two parcels for C$92 million, followed this year by Shell Canada bids totaling C$92 million for two parcels.

The shift southward has been led by major operators such as Husky Energy, Imperial, ExxonMobil, Chevron Canada and Shell, who are chasing a highly rated tight oil play while doubts build over whether a natural gas pipeline will ever be built from the Mackenzie Delta.

Seismic work next summer

He told the Globe and Mail that Franklin’s current funding comes from a “personal kind of investment to kick-start the company.”

Having landed the Beaufort rights, the company is required to make a deposit for one quarter of the C$7.5 million and must spend the balance on qualifying exploration work to extend its license from five years to nine years.

Barrett indicated he plans to start seismic exploration work next summer, estimating the cost for one month at C$10 million to C$15 million.

But, lacking the financial means to embark on a full-scale drilling program that would cost a minimum C$500 million, he hopes to identify enough oil prospects to attract investments from others, including Asian or Russian companies.

Barrett said his interest was stirred by data gathered and published by Houston-based ION Geophysical Corp., whose ship-towed sensors pointed to structures in the same league as Prudhoe Bay.

He conceded the whole process is a gamble, while adding there is a “tangible possibility … of coming up trumps.”

Franklin’s best current hope of bolstering outside interest also rests partly on results from a ship-borne marine 3-D seismic program by Chevron on the exploration license it acquired in 2010, although Chevron and others are not yet clear how they can meet new safety standards set by the National Energy Board.