Houston (Platts)--5Dec2012/558 pm EST/2258 GMT

Energy production in Canada's Northwest Territories is on the cusp of a boom, with an oil and gas resource base that rivals some of the world's most prolific energy producing regions, according to David Ramsay, NWT's minister of industry.

In the coming years the Arctic waters of the Beaufort Sea, which lies northwest of the NWT, "could rival the Gulf of Mexico in both oil and gas production," Ramsay said in a Tuesday interview.

Ramsay, who was in Houston to speak at the three-day Arctic Technology Conference, added that current estimates indicate that in addition to its offshore energy bounty, there is potentially 81 Tcf of gas and almost 7 billion barrels of oil waiting to be developed in the NWT onshore.

Article continues below...

Request a free trial of: Oilgram News
	Oilgram News brings fast-breaking global petroleum and gas news to your desktop every day. Our extensive global network of correspondents report on supply and demand trends, corporate news, government actions, exploration, technology, and much more.

"We see a real opportunity in the central Mackenzie Valley for shale oil," he said. A number of international and Canadian energy companies, including ConocoPhillips and Husky Energy, have expressed interest in developing the resource, Ramsay said.

The NWT has leased 13 large parcels of land in the region to exploration and production companies for C$632 million (US$637 million), he said.

"We've advanced the planning on a proposed winter program at Slater River, which, if approved, would include the construction of an all-season road and further evaluation of the two vertical wells we drilled in the first quarter of this year," Husky spokeswoman Kim Guttormson said Wednesday.

Husky COO Rob Peabody, addressing Husky Energy's Investor Day conference Tuesday, said of the central Mackenzie Valley play, "We know the hydrocarbons are there -- but this is a difficult operating environment, it's remote and we have our work cut out for us. It's early days and we will proceed cautiously."

In addition to the central Mackenzie Valley region, Ramsay said NWT officials also are excited about the prospect of opening up a new oil shale play in the southwestern corner of the territories, which he said could potentially "rival the Bakken in terms of size."

REMOTENESS CREATES CHALLENGES

Ramsay pointed out to attendees at the ATC that although the NWT covers a huge region, it is a largely unpopulated and inaccessible region.

"The area of the NWT is nearly 520,000 square miles -- which is about twice the size of Texas but a tad smaller than Alaska. But unlike Texas, our population is only 43,000 people scattered throughout a number of small communities," he said.

NWT has lagged behind other parts of Canada in terms of oil and gas production for a number of reasons, not the least of which is the remoteness of the region and the lack of infrastructure to transport its oil and gas to national and global markets, a problem Ramsay readily acknowledged.

"You don't have to look any further than the Mackenzie gas project. We face that reality, the difficulty of getting our resources to market," he said.

For years, territorial officials had pinned their resource development hopes on the construction of the long-proposed Mackenzie Gas project, a 1.8-Bcf pipeline that would transport Arctic gas to markets in southern Canada and the US.

However, in recent years, with the phenomenal growth of US shale production and the subsequent collapse of North American gas prices, the prospects that the Mackenzie Valley line will ever become a reality have dimmed considerably.

Earlier this year, Ramsay attempted to keep the project alive, when he floated the idea of reversing the flow of the proposed Mackenzie pipeline, enabling it to ship gas north to the coast of the Beaufort Sea, where it could be liquefied for shipment to markets in Asia as LNG.

Development of the shale oil play in the central Mackenzie Valley should be aided by an already-existing oil pipeline, which will provide "some capacity" for taking the initial crude oil production out of the region, Ramsay said.

"Once the oil shale gets into commercial production there may be another oil line built south from Norman Wells," he said.

In addition, the development of the oil shale in the region is also expected to result in the production of large volumes of associated gas. As a result of the need for new gas infrastructure to get this gas to a market, the question over the economic viability of the Mackenzie gas line "may come into much sharper focus," he said.

Ramsay added that the territories' long-held hopes of being able to develop its energy resources are getting closer to becoming a reality, with NWT set to finalize an agreement with the Canadian federal government next April that would give NWT negotiating rights for onshore energy projects.

Under Canada's constitution, the 10 provinces own and control development of their natural resources, but Ottawa has the final power to approve projects in the three northern territories -- NWT, Yukon and Nunavut -- returning some of the royalties and taxes through transfer payments.

Although the initial agreement would be confined to onshore resources, NWT officials hope the deal will open the way to extending terms to the offshore Beaufort Sea, similar to agreements the Canadian government has with Newfoundland and Nova Scotia.

--Jim Magill, jim_magill@platts.com
--Edited by Lisa Miller, lisa_miller@platts.com

Tweet