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NEB to rule on relief-well alternatives for Arctic drilling projects

This aerial image provided by the U.S. Coast Guard shows the Royal Dutch Shell drilling rig Kulluk aground off a small island near Kodiak Island Tuesday Jan. 1, 2013.

Sara Francis/AP/U.S. Coast Guard

The National Energy Board will review proposals by Chevron Corp. and Imperial Oil Ltd. for alternatives to same-season relief wells in future Arctic drilling, in the first tests of a recent change to long-standing policy.

Chevron and Imperial are in the early stages of planning deep-water wells on their respective acreage in the Beaufort Sea and are seeking rulings on whether they can avoid having to show they can drill another well in the same season to deal with a blowout or other environmental mishap.

Following its review of Arctic drilling practices following the BP Plc oil spill in the Gulf of Mexico in 2010, the NEB said it would consider alternative technology as long as it provided equivalent security.

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"We're willing to review what companies propose to use on a case-by-case basis," board spokeswoman Tara O'Donovan said. "This particular piece of the application will look at whether or not the approach that's being proposed by the company will meet the intended outcome of the [same-season relief well] policy."

There has been little offshore drilling in Canada's Beaufort in the past 25 years, and before that, most activity took place close to shore. Proposed deep-water wells are well off the mainland, and wells, which would likely cost over $100-million, could take three or four ice-free seasons to drill.

Chevron has proposed an exploration well on its EL-481 block, which is located 250 kilometres northwest of Tuktoyaktuk, N.W.T. In the spring, the oil major asked the NEB whether it could have a staged application process for an exploration well, which could be drilled starting around 2020.

The first phase would entail the consideration of the alternative to a same-season relief well, which Chevron has said is necessary before it can determine how much its project will cost.

Imperial, meanwhile, is lead partner in a proposal to drill on blocks known as Ajurak and Pokak, 175 kilometres northwest of Tuktoyaktuk. The company and its partners, Exxon Mobil Corp. and BP, would also begin drilling in 2020 at the earliest, Imperial spokesman Pius Rolheiser said.

At depths up to 1,500 metres, such underwater wells would be the deepest ever drilled in the Canadian Beaufort. Of the 92 wells drilled there to date, none has been under more than 68 metres of water, according to a development forecast prepared in 2012 for Aboriginal Affairs and Northern Development Canada.

"We believe that it's not technically feasible to drill a same-season relief well, the primary reason being the conditions, the duration of the drilling season – we're talking about taking at least three summer drilling seasons, and likely four, to drill and complete and potentially test a well," Mr. Rolheiser said.

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He declined to describe the alternative technology under consideration, saying the company wanted to submit the details to the NEB first.

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About the Author
Mergers and Acquisitions Reporter

Jeffrey Jones is a veteran journalist specializing in mergers, acquisitions and private equity for The Globe and Mail’s Report on Business. Before joining The Globe and Mail in 2013, he was a senior reporter for Reuters, writing news, features and analysis on energy deals, pipelines, politics and general topics. More

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