Industry Perspectives on Barriers, Hurdles, and Irritants Preventing Development of Frontier Energy in Canada's Arctic Islands

Abstract

The Canadian Arctic Islands and intervening channels are known to be rich in hydrocarbon resources. The combined Hecla and Drake Point discoveries of Sabine Peninsula on Melville Island have recoverable and marketable natural gas reserves estimated at almost 9 trillion cubic feet (Tcf). Proven reserves for the western Sverdrup Basin, drilled and delineated by industry exploration between 1969 and the early 1980s, are 17.5 Tcf gas and 1.9 billion barrels (bbl) of oil while total resources for Sabine Peninsula and western Sverdrup basin are estimated at 44 to 50 Tcf gas and 3.5 to 5.5 billion bbl oil (Chen et al., 2000). The Canadian Energy Research Institute (CERI) has recently released a report (Chan et al., 2005) which indicates that transportation of proven Melville Island gas is economically viable for development scenarios involving either liquefied natural gas (LNG) tanker shipments to the eastern seaboard of North America or compressed natural gas (CNG) vessels to a Mackenzie Valley pipeline. In spite of these findings, however, there is still significant industry reluctance to develop the gas resources of the Arctic Islands. This paper describes specific industry concerns with the development of Arctic Islands resources. Data were gathered during telephone interviews with exploration and development managers representing six medium-to-large domestic and multinational energy companies operating on the Arctic frontiers of North America. The issues discussed were identified in a Natural Resources Canada study entitled “Reducing the Geoscientific, Environmental and Regulatory Barriers to Exploration, Transportation and Development of Energy in the Arctic Islands.” The approach taken for each interview was to provide some historical background on the topic, explain the purpose of the interview, and then ask respondents’ opinions on which issues are most significant in accounting for the failure to renew exploration in Canada’s Far North and the lack of progress on developing existing proven reserves. It became apparent with the first interview that some issues, such as the lack of development infrastructure and certain regulatory problems, could be considered true barriers to energy development in the Arctic Islands, but other issues were viewed as either hurdles or mere irritants. It also became very clear that the potential solutions available to government scientists and regulatory agencies cover a broad spectrum. The paper concludes with specific recommendations for future work.