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Shell unloads permits in Canadian Arctic
GARY PARK For Petroleum News
Shell Canada is abandoning 30 legally contested exploration permits covering 2.13 million acres in Canada’s Eastern Arctic and separately raising questions about its commitment to the LNG Canada project.
The company said it is relinquishing rights to the offshore plays in the Lancaster Sound north of Baffin Island to the Nature Conservancy of Canada which will pass them on to the Canadian government.
Shell Canada President Michael Crothers said the leases are adjacent to where the government has already said it would like to establish a conservancy, opening the door to a “much larger marine conservation area in the North.”
Occupying the eastern entrance to the Northwest Passage, the permits encompass waters that are home to belugas, 75 percent of the estimated narwhal population, seals and walrus.
Inuit, who rely on the area for hunting, have tried for the last 30 years to have the area declared a conservation area.
Permits acquired in mid-1970s Two months ago the World Wildlife Fund filed documents in Canada’s Federal Court arguing that Shell’s permits are not valid because they were acquired in the mid-1970s and were never renewed.
Crothers said that before the lawsuit was filed his company had initiated talks with the Canadian government and the NCC.
However, he did say that Shell Canada has changed its thinking since 2014 when minutes of meetings with government officials showed the company was unwilling to part with the permits without compensation or having the chance to conduct some seismic tests.
“From my perspective, we saw an opportunity that was pretty special - to be part of a conservation effort. These are lands with really special ecological significance,” he said.
John Lounds, president of the NCC, agreed that Shell “really understands the importance of Lancaster Sound” and the company’s decision is preferable to waiting for a court ruling.
WWF President David Miller said the lawsuit is now unlikely to proceed, adding he applauded Shell for its decision.
Consultation with Inuit Officials say the next stage will involve consultation with Inuit groups, communities in the area and the Nunavut Territory government to decide how much of the area to protect.
Meanwhile, Shell Canada’s parent company said June 7 it is retreating from the LNG business as it gives priority to generating cash flow by improving returns on established projects.
The company said its integrated natural gas business has now reached a critical mass since closing its deal to acquire United Kingdom-based BG Group.
Dirk Lever, an oil and gas analyst at AltaCorp Capital, said the decision does not necessarily spell the end of the US$40 billion LNG Canada venture, with Korea Gas, Mitsubishi and PetroChina as partners, to export up to 24 million metric tons of LNG a year.
Four months ago, Shell postponed a final investment decision on the project until the end of 2016.
Its latest list of projects awaiting investment decisions did not include BG’s planned Prince Rupert LNG project, which is designed to export 21 million metric tons a year.
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