ALBERTA

Imperial Oil, partners defer exploration drilling plans in Beaufort Sea

06/26/2015 03:01 EDT | Updated 06/26/2016 05:59 EDT
CALGARY - Imperial Oil and its partners are deferring plans to explore for oil in the Beaufort Sea because they need more time to study how to safely drill in harsh Arctic waters.

Imperial, its U.S. parent ExxonMobil and BP are asking the federal government for a seven-year extension to their licence, which expires in 2020.

"For us, it's all about giving us the time to do the work we believe necessary so that we can deliver the most technically sound and environmentally responsible program we can," said Imperial spokesman Pius Rolheiser.

In a letter Friday informing the National Energy Board of their decision, Imperial said it's suspending regulatory work and planned submissions, including a plan to meet the same-season relief well requirement.

The energy board requires companies to show they can kill a ruptured oil well in the Arctic offshore with a relief well in the same season it's drilled — a difficult and costly proposition in a region that's covered in ice for much of the year.

Under a best-case scenario, Imperial had initially looked to begin drilling as early as 2020, said Rolheiser.

In its letter, Imperial stressed it's not giving up on the Beaufort and will maintain an office in Inuvik, N.W.T., to collect ice data and find business, employment and training opportunities for local communities.

"Imperial remains committed to the Arctic as an important future source of energy," wrote exploration operations manager Lee Willis.

In December, Chevron Canada put its Beaufort plans on hold indefinitely, citing "economic uncertainty."

Separately, Imperial is in discussions with the energy board about potentially extending its permit for the long-stalled Mackenzie Gas Pipeline, which expires at the end of the year if work doesn't begin.

Consultant Doug Matthews said it's looking to be a slow time for the North's energy sector. Exploration activity in the Canol shale in the Central Mackenzie Valley has "slammed shut" and Imperial's mature Norman Wells field probably won't be pumping oil much longer.

It's costly to explore for oil in the North, so it doesn't make much economic sense when oil prices are low, he said. Plus, enormous volumes of oil and gas are flowing from shale formations closer to market.

"From a parochial point of view, I'm disappointed in their decision," Matthews said of the Beaufort deferral.

"But from a larger perspective, I can see maybe some of the thinking behind it."

With an increasing focus on battling climate change, it makes sense that energy firms would look at some of the more far-flung assets in their portfolios.

"Maybe if I'm in that business, I might just want to slow down for a while — take a couple of years and just see where this whole thing's going."

Follow @LaurenKrugel on Twitter.

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