Arctic Oil Find

There’s oil under that ice… but it sounds like the boom years aren’t here yet.

Devon Energy has no plans yet for Arctic oil find
Claudia Cattaneo, Financial Post
Published: Wednesday, October 17, 2007

CALGARY — Devon Energy Corp. revealed yesterday it found a giant pool of oil in the Beaufort Sea two years ago when it was actually searching for natural gas. But even with oil prices pushing US$90 a barrel, the U.S. company says it has no immediate plans for the huge discovery.

The Oklahoma City-based company said its US$60-million Paktoa C-60 well, initially portrayed as a disappointment because it didn’t find the trillions of cubic feet of gas it was aiming for, struck an estimated 240 million barrels of recoverable oil.

Michel Scott, spokesman for the company, said the discovery confirms there are big resources in the Canadian Arctic, but commercialization is many years away because there is no infrastructure. “We have confirmed the presence of both oil and gas,” he said. “Most significantly, based on initial results, it appears there is a recoverable resource there of 240 million barrels of oil.”

Devon would not disclose the quality of oil found, nor the size of natural-gas reserves. At 240 million barrels, the pool would be on the same scale as the initial White Rose oil discovery in Newfoundland’s offshore. The company has no plans for further drilling to better size up what it has.

“At the end of the day, it’s beyond economic reach,” Mr. Scott said. “We would need some critical mass going. It takes a lot of time and energy to get these things to market — just look at how long it’s taking the Mackenzie pipeline guys. At this juncture, the company has better places to invest its money.”

The company has obtained a significant-discovery licence. The find could eventually be developed if an oil line is built in conjunction with the proposed Mackenzie Gas Pipeline. Another option is to move the oil by tanker through the Northwest Passage, which is becoming increasingly navigable due to global warming. The company may also consider selling it.

Some 26 significant discoveries — eight gas, four oil and 14 oil and gas — were made in the Beaufort Sea during a drilling boom two decades ago funded largely through federal incentives. At the time, companies such as Dome Petroleum Ltd., Imperial Oil Ltd. and Gulf Canada Resources Ltd. were searching for oil.

The National Energy Board has estimated that between 585 million barrels and 1.44 billion barrels of recoverable oil has been discovered in the Mackenzie Delta/Beaufort Sea region, not including Paktoa.

Devon’s Paktoa well was the first to be drilled in the region in 16 years, but required a major effort because the Beaufort lost its infrastructure after oil companies pulled out nearly two decades ago.

This summer, Imperial Oil made a commitment with its parent, Exxon Mobil Corp., to spend $585-million to explore in the Beaufort over the next nine years, after winning exploration rights to a 205,321 hectares parcel located about 140 kilometres from the Mackenzie Delta.

ConocoPhillips secured a licence to explore a 103,711-hectare offshore parcel with a work-expenditure bid of $12-million, while Chevron Corp. picked up rights to a third block with a bid of about $1-million.

Financial Post

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