N.W.T. bangs the oil drum in Houston

Billions of barrels trapped in tight rock in the Far North

The Northwest Territories is sitting on a potentially huge shale oilfield in the Mackenzie Valley and government officials are in Houston this week meeting with the firms that intend to tap it.

While there are also massive natural gas deposits under the Beaufort Sea, developing the riches of the Mackenzie Valley seems to be closer at hand. There is already a small, underutilized oil pipeline between Norman Wells and Zama Lake in northern Alberta, which connects into the provincial oil pipeline system.

“We are anxious to see development move forward in an environmentally responsible manner in both the Mackenzie region and the Arctic coast,” said N.W.T. Industry Minister David Ramsay.

At an Arctic technology conference Wednesday in Houston, Ramsay told local industry representatives that “based on the geological analyses from the U.S. Geological Survey as well as our own advisers, the potential discoveries (of oil and gas) in the waters off the coast of the N.W.T. may rival the Gulf of Mexico.” A test well in the 1980s produced 100,000 barrels of oil, which left the Arctic in a tanker.

“The mayor and deputy mayor of Tuktoyaktuk were with us and are very excited about the potential in the delta. It means lots of jobs and opportunities, because right now there is not a lot going on today,” Ramsay said in an interview.

“There is a buy-in by aboriginal groups, and they support the oil and gas development and a natural gas pipeline. For us, the most important thing is to see some development and see some movement forward, so we can get jobs and opportunities for our people.”

But some of the big oil firms are now betting that the Mackenzie Valley, not the Arctic coast, may be the first to see commercial development. Ramsay said Husky Energy drilled two exploratory wells last winter and plans to spend about $50 million this winter to put in a 40-kilometre allweather road on the west side of the Mackenzie River and conduct more drilling and testing. Other firms like MGM Energy, ConocoPhillips, Imperial and Shell are all active in the area.

“There is going to be $100 million spent in this area during the coming winter. You couldn’t get a hotel room for six months last winter in Norman Wells,” Ramsay said.

While the Norman Wells oilfield was first tapped by Imperial in the 1920s, most of the deposit is in so-called tight rock. Until the recent development of horizontal drilling and high-pressure fracturing, that oil was considered impossible to produce. But fracking has unleashed more than a million barrels of light oil per day in U.S. fields such as the Bakken in North Dakota and Eagleford in Texas.

“Experts have told us there are billions of barrels in the central Mackenzie Valley. Norman Wells is the centre of the deposit, and the Canol shale play is west of the river and stretches for 200 kilometres down the valley,” Ramsay said.

The oil will come to the surface with between 20 per cent and 60 per cent liquids-rich gas. That fact alone might be enough to help support the long-proposed Mackenzie Valley gas pipeline.

But the big challenge for N.W.T. energy development is expense — it can cost two or three times more to do the same work as in Alberta — and the lack of pipelines. Without a gas pipeline or new oil pipeline, the current oil exploration around Norman Wells will mean that first producers will have an advantage.

The Enbridge pipeline has a design capacity of 50,000 barrels per day and is now carrying about 20,000 bpd from the Norman Wells field.

Tim Coleman, director of the Mackenzie Valley Pipeline Office, said that represents a chance for the current shale oil developers to easily ship some of their oil.

“There is capacity on that line, so the first one through the door (to add oil to the line) will have that opportunity.”