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Explorers may soon return to Nunavut Federal, territorial agencies are working to lure companies back to High Arctic after recent jump in petroleum resource estimates Rose Ragsdale For Petroleum News
Oil and gas exploration in the High Arctic regions of Canada’s Nunavut Territory may be on the cusp of a comeback after an abrupt halt a quarter century ago when oil prices plummeted.
In 1986, explorers departed to focus on the more accessible Beaufort Sea and East Coast of Canada, after scoring 20 impressive oil and/or gas discoveries in Nunavut,.
The majority of the deposits are in the Sverdrup basin, a vast sedimentary formation that sprawls across half a million square kilometers of Nunavut’s ragged Arctic coastline from the northern tip of Greenland to the edge of the Beaufort Sea.
After nearly two decades of drilling, explorers had tapped oil or gas formations in the Sverdrup basin, Baffin Bay and several other areas of Nunavut.
In one relatively small area of the Sverdrup basin, alone, explorers found three large petroleum deposits: Cisco, estimated to hold 1 billion barrels of oil equivalents; Drake Point, a natural gas field with 6 trillion cubic feet on Melville Island; and Hecla just offshore in the Prince Gustaf Adolf Sea with 2 billion barrels oil equivalents and 10 tcf of gas.
Only one oil field, at Bent Horn on Cameron Island to the southeast, went into production, primarily to supply fuel to the nearby Polaris lead-zinc mine. Between 1985 and 1996, the field produced 3 million barrels of oil so light and sweet that the miners were able to burn the unrefined crude to power their operation.
Nearly 25 years later, oil and gas exploration and development is a wistful memory in Nunavut. But Canada and the territorial government are working to change that, hoping to lure industry to return with a combination of enticing new geological data and streamlined regulations.
“It’s just a matter of time until the petroleum industry returns to Nunavut,” petroleum geologist Peter Frampton told Petroleum News in a recent interview in Iqaluit, Nunavut.
“Since industry moved to eastern Canada and over to the Beaufort Sea, it has been easy to underestimate these areas. But the companies are moving this way. It’s a natural progression, and we’re pretty excited,” said Frampton, who is senior advisor for petroleum resources at the Government of Nunavut’s Department of Economic Development and Transportation.
In 2008, some oil and gas companies expressed interest, indicating that they wanted changes in some regulations governing certain areas of Nunavut.
“They indicated that they want unitization changes to give the companies incentives to determine who owns what percentage of the deposits in the Sverdrup basin,” Frampton said.
Higher resource estimates Further fueling a revival of interest are recent petroleum resource estimates for Nunavut. Based on data obtained from bedrock geological surveys taken in the 1960s and 1970s, the U.S. Geological Survey had estimated Nunavut’s resource to total 67 billion barrels of oil equivalent.
Today, territory’s vast land mass — one-fifth the size of Canada — along with its offshore areas, is considered much more prospective, hosting between 9.2 billion and 23 billion barrels of oil and between 97.3 tcf and 262.3 tcf of natural gas, according to USGS and Geological Survey of Canada estimates.
And even these geological assessments may underestimate the territory’s potential resource, according to Frampton.
“Only 180 wells have been drilled in all of Nunavut, where just one company drills hundreds of wells in western Canada,” he said. In Frobisher Bay where fewer than 10 wells were drilled, for example, explorers discovered a gas field with 3 tcf to 4 tcf of gas, he observed.
Frampton said some geologists theorized after the industry departed in 1986 that the big oil and gas find in the Sverdrup basin is yet to be made.
He cited the Baffin Bay region in northeastern Nunavut across the water from Greenland as being another focus of renewed interest.
The USGS recently completed a new estimate for undiscovered oil and gas resources in the sea north of the Arctic Circle between west Greenland and eastern Canada, which includes the Baffin Bay licensing area. The mean estimate for oil and gas in the region was calculated at more than 18 billion barrels of oil equivalents.
“Recent indications are this area could be just as big as the Mackenzie Valley and the Beaufort Sea,” Frampton said. “And back in 1981, the Baffin Bay region was considered likely more prospective for oil and gas than Greenland.”
Exploration in Greenland Greenland since has jumped to the forefront of petroleum exploration in the eastern Arctic. The country has sponsored numerous seismic surveys and is forging ahead with development of offshore oil and gas fields on its side of Baffin Bay and Davis Strait.
This summer, Greenland is set to drill four wells in offshore areas, Frampton said.
Greenland’s Bureau of Minerals and Petroleum also planned a major bid round for the Baffin Bay area. The deadline for submission of applications for this licensing round was May 1. Applicants could apply for licenses in 14 predefined blocks varying in size between about 8,000 square kilometers and 15,000 square kilometers. The country’s total licensing area in Baffin Bay covers about 151,000 square kilometers.
TGS NOPEC, a Norwegian contractor, has acquired new 2-D seismic data in the Baffin Bay area. The firm’s 2009 seismic program, its 10th consecutive year of performing seismic surveys in the Arctic, was designed to assist in the evaluation of the Baffin Bay area prior to the bid round.
Industry also has showed considerable interest in the Baffin Bay licensing round. A prequalification round for the area ended Oct. 1 with 13 international oil companies applying to become approved operators. The group included ExxonMobil, StatoilHydro, BP, Japan National Oil Corp., Texaco and Shell.
The Government of Greenland has said it will follow the 2010 bid round with licensing rounds in the Greenland Sea in 2012 and 2013.
Renewed interest in Canada Frampton said TGS got permission from Canada to do modern high-resolution prospecting on Nunavut’s side of Baffin Bay on a speculative basis.
“They indicated that they’ve seen some very, very interesting geological phenomena that they wish to follow up on. (To do speculative prospecting,) they must make a significant investment, and they must expect to get a return on that investment,” the geologist said. “It’s been very good news for us.”
The federal government, meanwhile, has resumed geological mapping in the Far North with a C$100 million over five years (2008-13) in a new Geo-mapping for Energy and Minerals Program to fill the large gaps in knowledge of the country’s energy and mineral resources.
GEM has budgeted C$22 million for this year’s program, which will focused mainly on mapping areas of the Arctic, including a 2-D seismic survey of Baffin Bay and Foxe basin and aeromagnetic surveys of northern Baffin Island and in offshore areas.
In 2009, the Canada-Nunavut Geoscience Office studied the potential of hydrocarbon systems in Paleozoic outcrops on Melville Peninsula on the western margin of Foxe Basin.
Nunavut’s government, meanwhile, is taking steps to advance its cause with industry.
“We’re working with the National Energy Board and (Indian and Northern Affairs Canada) to identify problems and obstacles in our regulatory framework and smooth them out,” Frampton said.
INAC is also working on a mapping tool for petroleum and environmental resources.
“Usually that type of assessment or analysis is done prior to a licensing round for oil and gas exploration,” he said.
A joint ice study currently under way by the Nunavut government, Fisheries and Oceans Canada and the private sector “is the kind of engineering assessment that is needed to ship petroleum from the region,” Frampton added.
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