ConocoPhillips Co. is about to make history in the Northwest Territories.
The global oil and gas company is preparing to employ horizontal drilling and hydraulic fracturing technology on wells in the Canol shale oil play in the Central Mackenzie Valley in February.
Rock-fracturing, or "fracking," is a controversial technique, but one that has also proven wildly successful. North Dakota's Bakken, Texas's Eagle Ford and Alberta's Duvernay fields are booming thanks to horizontal fracking. Government leaders in NWT, as well as energy executives, hope the Canol play proves prolific using the same technology. The potential reserves could reach a billion barrels of oil, according to speculative estimates.
Canada's Arctic region holds billions of barrels of oil and gas both onshore and offshore, but logistical problems and extremely high costs have kept exploration and production sporadic. The last drilling boom, in the 1970s and 1980s, was aided by government subsidies. The industry drilled hundreds of wells and made many oil and gas discoveries, but despite this success, very little of the resources have been produced.
Now, a combination of improved technology, more open seas as a result of melting ice and the expectations of rising oil prices have rekindled interest in the region among the world's largest oil companies. Oil companies are considering drilling deep-water wells for the first time, reviving shallow water drilling plans and making moves to crack open the rocks in the Canol shale play in the Sahtu region.
The National Energy Board in October gave Conoco permission to drill and horizontally frack two wells in the Central Mackenzie Valley. It marked the first time that the NEB permitted horizontal fracking in the North. Husky Energy Inc. is also in the neighbourhood, building roads and hoping to drill horizontal wells in the winter of 2015-16.
MGM Energy Corp. in December applied to the NEB for a so-called significant discovery licence – a big hint that it believes there is potential for energy riches. Royal Dutch Shell PLC and MGM are partners.
"The Sahtu development could become one of the more significant economic drivers in the NWT," said Tim Coleman, director of minerals, oil and gas in the NWT's Department of Industry, Tourism and Investment. "That could really drive the economy in the Mackenzie Valley."
The Amauligak discovery in the Beaufort Sea is next on the list of potential economic drivers. Oil was discovered there in 1984 and the revived effort is led by Conoco and Chevron Corp. Conoco operates the project, which is about 50 kilometres offshore, and is near the end of the first phase of a three-phase study. Conoco wants to wrap up the current phase this year. The discovery may host 235 million barrels of oil and 1.6 trillion cubic feet of gas. Because this offshore field is near the town of Tuktoyaktuk, the NWT government hopes the play will fuel the local economy.
The energy industry also has designs on deep-water drilling in the Beaufort Sea, about 175 kilometres northwest of Tuktoyaktuk. Imperial Oil Ltd., Exxon Mobil Corp. and BP PLC have pitched a project where they could drill as deep as 1,200 metres. The partners hope to file an environmental impact statement later this year. The trio could make a decision to drill in 2016, and action could start in the summer of 2020. Because of the dangers of an offshore oil spill – think of BP's disastrous Macondo well in the Gulf of Mexico – the Canadian government demands companies must have the capability to drill a so-called same season relief well (used to kill an out-of-control well) or have the equivalent technology to limit damage from a major spill. Imperial and its partners plan to use alternative technology rather than same-season relief wells.
Chevron Corp. and its partner, Statoil ASA, conducted the Canadian Beaufort's largest 3-D seismic program on their acreage, known as EL481, in the third quarter of 2012. The companies are still evaluating the data to determine drilling plans for the block, which is located in 800-1,800 metres of water, 120 km north of the mainland, Chevron spokesman Leif Sollid said.