A USGS arctic survey released last year estimated that the polar region held 22% of the world’s undiscovered, technically recoverable oil and gas including 90 billion bbls of undiscovered oil, 1670 trillion ft3 of gas and 44 billion bbls of NGLs. Over 30 billion bbls of that oil and 221 trillion ft3 of gas lay in Alaska’s Arctic waters. Canada’s potential is 6 billion bbls of oil and 118 trillion ft3 of gas. The rest is spread across Russia’s Barents Sea and the basins that lie to the east and west of Greenland.
For such a vast area, relatively little exploration has occurred. Extensive seismic and drilling activity occurred in the Canadian Arctic during the 1970s and 1980s as the Canadian government gave extensive incentives to search in federal lands. Approximately 2 billion bbls of oil and 20 trillion ft3 of natural gas were found.
While current North American gas prices are depressed, they are still well above 1980 levels. In addition, advances in cold region production and transportation have reduced unit costs. Last December, BP paid C$ 1.18 billion to secure an exploration licence in the Beaufort Sea. Cairn, Husky and Exxon are all exploring in Greenland and Canada’s Davis Strait.
In Canada, approximately 6 trillion ft3 of natural gas underlay the onshore Mackenzie Delta. Imperial Oil, ConocoPhillips, Shell, ExxonMobil and the Aboriginal Pipeline Group seek to build the Mackenzie Gas Project, a 30 in., 1220 km pipe running south to Alberta. Gazprom is also working in partnership with StatoilHydro and Total to develop the giant Shtokman oil and gas field located in the Barents Sea. Discovered in 1988, the field, which sits 555 km offshore in 350 m of water, is estimated to hold 113 trillion ft3 of gas and 200 million bbls of condensate. The region is subject to drifting icebergs of up to 1 million t, however. Development of the field will benefit from new seafloor technologies developed by StatoilHydro to handle production from the 6 trillion ft3 of gas at its Snohvit field in the Barents Sea. They have also developed a suite of remotely operated vehicles and autonomous underwater vehicles to survey the operation, as well as manipulator arms to perform repairs and operational tasks. The development of the Shtokman field has been estimated at up to US$ 25 billion.
A sensitive environment
A major concern is the environment. Preservation groups have resisted attempts to open up wilderness areas in Alaska for several decades, and petroleum companies can expect more of the same for new areas of exploration. This year, Shell had planned to drill a dozen wells in the Alaska Beaufort Sea at the Sivulliq prospect, on which it had spent US$ 803 million in licences. Last November, however, the US Court of Appeals for the Ninth Circuit ruled that the Minerals Management Service (MMS) did not properly consider the risks of oil spills, disturbance to migrating whales and disruption to traditional hunting lifestyle of the Inupiat Eskimos. Although the decision was subsequently vacated, Shell has suspended plans for the Alaska Beaufort Sea this year. In the meantime, it will focus its attention on its US$ 2.1 billion licences in the Chuckhi basin, which lies between northwestern Alaska and Eastern Siberia. The MMS says the basin holds an estimated 15 billion bbls of recoverable oil and 77 trillion ft3 of recoverable gas.
Experts are confident that effective environmental safeguards can be in place by the time the Arctic is potentially totally ice free by the summer of 2020. On the other hand, the ice may simply return and make the whole exercise moot. There is one thing that Arctic explorers can always count on, and that is the extreme unpredictability of this vast and intimidating region.
Author: Gordon Cope, Oilfield Technology correspondent