ARCHIVED - Beaufort Sea and Mackenzie Delta Open for Posting

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Bulletin
Volume 4, Number 1
January 1997

Call for Nominations

The Northern Oil and Gas Directorate is inviting industry to select exploration acreage over some 100 million hectares (385,000 square miles) in the Mackenzie Delta, Beaufort Sea and western Arctic Islands. This call includes acreage formerly held under Exploration Licence 358 located immediately north of the Amauligak production licence.

The Call for Nominations opens at 9:00 a.m. on Monday January 20 and closes at 4:00 p.m. (Eastern Time) on Friday April 4, 1997. Posted parcels will be included in a competitive call for bids scheduled to close in August 1997.

Interested parties may download the call document and map from our Internet World Wide Web site. Paper copies are also available from the Northern Oil and Gas Directorate (819) 994-1606 or the Frontier Information Office of the National Energy Board in Calgary (403) 299-3112.

It is the ninth year in a row that this area has been opened to posting requests. The annual cycle of nominations meets the expectation of local communities and industry for a predictable planning environment which should assist in developing land acquisition, exploration and other business strategies.

Mackenzie Delta - New Licences

On January 6, 1997, the Minister of Indian Affairs and Northern Development announced the issuance of two new oil and gas exploration licences in the Mackenzie Delta (see ELs 384 and 385 on attached map).

Husky Oil Operations Ltd. and Gulf Canada Resources Limited received the licences in exchange for the surrender of 21 former permits in the Cape Bathurst region of the NWT in accordance with subsection 17.1(b) of the Canada Petroleum Resources Act. These former permits were on land for which the Inuvialuit received title, including subsurface mineral rights, under paragraph 7(1)(a)(ii) of the Inuvialuit Final Agreement.

The land exchange was concluded with the support of the Inuvialuit and the Government of the Northwest Territories and allowed Canada to honour its
commitments under the Inuvialuit Final Agreement as well as Husky's and Gulf's exploration rights.

Ikhil Gas for Inuvik?

The Town of Inuvik (population of about 3 000) in the Mackenzie Delta is located close to over a billion barrels of discovered oil resources and 10 trillion cubic feet of gas. Yet diesel fuel transported by rail and barge from Edmonton is used to generate power for this community. The Inuvialuit Petroleum Corporation is starting operations this winter which may change this. They plan to test and, if satisfactory flows are demonstrated, to produce gas from a 1986 discovery drilled by Gulf Canada Resources Limited some 50 km north of Inuvik.

Gas has already been drill-stem tested in the Ikhil K-35 well at 1125 metres at rates of 3.5 Mcf/day. IPC and their consultant, North of 60 Engineering Ltd, have made a preliminary estimate of recoverable gas at between 18.2 billion and 40.5 billion cubic feet (0.52 billion to 1.15 billion cubic metres). If these estimates are confirmed as reserves and the project gets the green light, the Ikhil pool could supply the needs of the community for some 25 years.

Operations to open and test the existing well are expected to begin later this winter. Following this evaluation, the company may submit a development plan for regulatory review.

Discovered Resources of the Mackenzie Delta and Beaufort Sea

The National Energy Board will be releasing estimates of resources by discovered pool in the Mackenzie Delta and Beaufort Sea in early Spring 1997. These estimates are based on probabilistic analysis of information from discovery and any delineation wells, reinforced by regional knowledge of variation in key reservoir parameters. This will be the first time that the Board has issued pool-specific estimates of resources in the Mackenzie-Beaufort Basin. This information will assist companies in assessing the likely potential of future discoveries.

Exploration Potential of Lands Offered

The Call for Nominations includes two highly prospective sedimentary basins with a proven record of discoveries. Most significant in terms of discovered resources and potential is the Beaufort-Mackenzie Basin underlying the Mackenzie Delta and adjacent offshore. Second in importance is the Sverdrup Basin in the Arctic Islands, the western portion of which lies within the Inuvialuit Settlement Region and is included in this Call. In addition, very large areas of the sparsely explored continental margin extend west from the Mackenzie Delta to the US border and east to the mainland adjacent to the Canadian Arctic Islands. Several sedimentary basins and sub-basins which are poorly explored or undrilled underlie this margin and others may yet be identified.

The Mackenzie Delta-Beaufort Sea Basin has an excellent discovery record with 53 discoveries, including two major oilfields, three major gas fields and one major oil and gas field. (A major field contains oil resources from 100 million to 500 million barrels / 15 to 80 x 106 cubic metres or gas resources of 1 trillion to 5 trillion cubic feet / 28 to 141 x 109 cubic metres).

Discovered resources in this basin total 300 x 109 cubic metres (10.7 trillion cubic feet) of gas, and 212 x 106 cubic metres (1310 million barrels) of oil. A 1994 resource assessment by the Geological Survey of Canada suggested that the prospects for doubling the number of discoveries in this size range are good, in both onshore and offshore exploration plays. It estimated regional endowment of recoverable resource in terms of resources of current interest. Using oil resources in pools exceeding 25 million barrels and gas pools larger than 100 billion cubic feet, the total resource of current interest was estimated at 4.4 billion barrels of oil in 50 pools and 28 tcf of gas in 65 pools. Of this, 3 billion barrels of oil and 17.2 tcf of gas remain to be discovered. (Geological Survey of Canada, 1994, Petroleum Resources of the Mackenzie Delta and Beaufort Sea, GSC Bulletin 474.)

The discovered inventory forms a basis for future projects to export both oil and gas from the Mackenzie Delta region to southern markets. Such export has been proposed in the past, most recently in 1989 for gas export from the Delta by a consortium of Esso, Shell and Gulf. Extension of the Mackenzie Valley oil pipeline some 600 km from Norman Wells to the Delta could tie in existing onshore oil discoveries and also the jewel of the shallow offshore -- the Amauligak field (300 million to 400 million barrels of oil and in excess of 2 tcf of gas). The main question about these developments is "when?". Renewed exploration and discovery of additional reserves in the region over the life of new exploration licences issued as a result of this Call would advance the prospects of such a major development.

Primer on Northern Benefits

In the North, benefit requirements are associated with three sources: the Canada Petroleum Resources Act which provides for the establishment of terms and conditions in Calls for Bids pursuant to subsection 14.3, the Land Claim Settlement Legislation (chapters 21 and 22 dealing with Subsurface Resources in the Gwich'in and Sahtu Final Agreements, respectively, and section 10 of the Inuvialuit Final Agreement dealing with Participation Agreements), and the Canada Oil and Gas Operations Act (subsection 5.2). Their application varies with the ownership of the surface and subsurface at the location of the exploration rights as follows:

Crown Surface - Crown Subsurface: at the exploration stage, a company's commitment to follow the "Benefits Statement of Principles" associated with the Call for Bids may be deemed to fulfill the Canada Oil and Gas Operations Act's "Benefits Plan" requirements. Indeed, the "Benefits Statement of Principles" constitutes an obligation which is contracted upon submission of a winning bid. The obligation rests with the holders of the exploration licence who, in turn, are committed to ensuring that their contractors follow the Principles with respect to all subcontracting opportunities. At the development stage, in order to fulfill the Canada Oil and Gas Operations Act's requirements, a "Benefits Plan" must be submitted for Ministerial approval for any formal proposal to develop an oil or gas discovery for production.

Gwich'in or Sahtu Surface - Crown Subsurface: a "Benefits Plan" must be submitted for Ministerial approval, pursuant to the Canada Oil and Gas Operations Act for all significant oil and gas operations, i.e., for activities at and beyon d the seismic exploration stage.

Inuvialuit Surface - Crown Subsurface: companies must have concluded a "Participation Agreement" with the Inuvialuit as defined in section 10 of the Inuvialuit Final Agreement, prior to exercising their right of access for the purposes of exploration, development and production activities. The Canada Oil and Gas Operations Act's "Benefits Plan" requirement can be met with a "cooperation agreement" under subsection 16.(12) of the Inuvialuit Final Agreement.

Aboriginal Surface - Aboriginal Subsurface: all terms and conditions associated with the tenure of the lands must be negotiated with the Aboriginal land owner.

Toll reduction - Norman Wells pipeline

On Dec. 18, 1996 Interprovincial Pipe Line (NW) Ltd. filed an application with the National Energy Board for interim tolls for 1997 on the oil pipeline from Norman Wells. The reduction for shipments to Zama would be 17%, from $34.71 to $28.81 per cubic metre.

Central Mackenzie Call for Bids

Please note that bidding closes at noon on May 1, 1997, for the eleven parcels in the Central Mackenzie Valley. Copies of the Call for Bids are available from our Internet Web site or by contacting the Northern Oil and Gas Directorate or the Frontier Information Office of the NEB.

Educational Seminar on the CPRA

The Northern Oil and Gas Directorate will be presenting a full-day seminar on the "Management of Oil and Gas Resources in Canada's North" on March 13, 1997. The seminar will be held at the Metropolitan Centre, in Calgary, and is sponsored by the Canadian Association of Petroleum Landmen. For registration, please contact Denise at the CAPL office at (403) 237-6635.

1995 Annual Report Available

For a copy of the 1995 Northern Oil and Gas Annual Report, please contact Marlene Desjardins at (819) 953-8529.

Web Sites of Interest

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