CALGARY—An oil industry consortium including Exxon Mobil Corp.
and BP PLC on Friday suspended its Canadian arctic exploration
program in the Beaufort Sea, citing insufficient time to begin test
drilling before its lease expires in 2020.
The move represents a setback for oil companies active in
Canada's arctic waters and follows a similar decision by Chevron
Corp. in December to halt its own exploratory drilling program in
the Beaufort Sea. Those projects have been stymied by regulatory
hurdles and some of the world's highest extraction costs.
Imperial Oil Ltd., Exxon Mobil's Canadian affiliate, informed
federal regulators in Canada of its decision to suspend its
Beaufort Sea exploratory program on Friday and said it would seek
to have its current lease extended retroactively to 16 years.
"If approved, the extension would provide sufficient time to
undertake the necessary technical studies and develop the
technology and processes to support responsible development in the
Beaufort Sea," Imperial Oil said in a letter to Canada's National
Energy Board.
The Arctic holds billions of barrels of untapped oil reserves,
but offshore-drilling costs there are among the highest in the
world because of its remote location and severe weather. The
Imperial-led consortium has been planning to drill a well as deep
as 6 miles beneath the floor of the Beaufort Sea, one of the
deepest offshore wells in the world and the deepest by far in the
Arctic.
The leases where the proposed well would be drilled are located
about 110 miles off the coast of the Northwest Territories town of
Tuktoyaktuk. Imperial, Exxon Mobil and BP obtained leases for the
right to drill in 2007 and 2008. The three companies have since
combined their Beaufort programs into an Imperial-led joint venture
called Imperial Oil Resources Ventures Ltd.
Imperial and Chevron have asked the NEB, Canada's national
energy regulator, to ease rules designed to prevent undersea well
blowouts such as the one involved in the 2010 Deepwater Horizon
spill in the Gulf of Mexico.
In Canadian Arctic waters, operators must have standby capacity
ready to stop a blowout by drilling a relief well within the same
season. But wells in the Beaufort Sea need to be drilled so deep it
will require multiple seasons to complete, so license holders have
sought an exemption allowing alternative measures.
The NEB has said it is reviewing those requests.
The Arctic holds about one-third of the world's untapped natural
gas and an estimated 13% of as-yet undiscovered crude, or roughly
90 billion barrels of oil. More than three-quarters of those
deposits are offshore, according to U.S. Geological Survey
estimates.
Write to Chester Dawson at chester.dawson@wsj.com
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