Arctic seen as source for additional oil, gas
Oklahoma companies not rushing for northern exposure

BY JAY F. MARKS Comments 3
Published: November 6, 2009

A recently released report by the U.S. Energy Information Administration indicates nearly a quarter of the world’s undiscovered oil and natural gas resources are north of the Arctic Circle, but Oklahoma energy companies don’t seem to be in any hurry to get there.

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Devon Energy Corp. was active in northern Canada for about five years earlier this decade, spending about $300 million on exploration.

Michel Scott, a vice president for the company’s Canada operations, said Devon drilled the first offshore rig in that area in more than a decade during that period, but eventually shut down its operations there in 2006 after efforts to build pipelines stalled.

"We couldn’t see the light at the end of the tunnel,” he said.

Scott said Devon officials had opportunities to invest the company’s money elsewhere.

"In retrospect, it was the right call,” he said.

Devon discovered more than 250 million barrels of oil that could be recovered in the Arctic before it abandoned its operations there, Scott said.

A 2008 U.S. Geological Survey assessment estimates there is more than 400 billion barrels of oil equivalent in the region, according to the government’s report on the Arctic’s oil and gas potential. More than a third of those resources are in the North American part of the region.

Transport expense

The report includes several "bad news” points, noting the resource base is mostly natural gas and liquids that are more expensive to transport than oil. There also are unresolved sovereignty claims in the area, which includes portions of eight countries.

"The bottom line for Arctic oil and natural gas potential is high costs, high risks and lengthy lead times can all serve to deter their development in preference to the development of less challenging oil and natural gas resources elsewhere in the world,” author Philip Budzik wrote.

"Thus, while the Arctic has the potential to be a more important source of global oil and natural gas production sometime in the future, the timing of a significant expansion in Arctic production is difficult to predict.”

The report indicates the North American side has up to about 65 percent of the undiscovered Arctic oil.

Enid’s Continental Resources has focused its efforts on oil, so the Arctic’s potential interests chairman Harold Hamm.

"From an explorationist’s view, I certainly like the Arctic,” he said. "There’s a lot of oil, I think, in place up there.

"This is something that would turn my head quickly.”

Hamm said he has his hands full with operations in the Bakken Shale in North Dakota and Montana, but he isn’t ready to write off the Arctic’s potential.

‘Oil to be found’

He said too many people already have concluded there was not much oil left in the United States.

"My belief is there’s a lot of oil to be found,” Hamm said. "Our Bakken play is certainly a good example of that.”

Devon still holds a couple of big discovery licenses in northern Canada, along with some valuable seismic information, but Scott said there are many stumbling blocks to further development there.

He said the cost of the pipeline that would make further Arctic production feasible keeps rising. The most recent estimate put it at $16 billion.

There also appears to be an abundant supply of natural gas in elsewhere in North America, Scott said, so there is no reason to go into the Arctic.

"Quite honestly, I don’t know if we’ll ever go back,” he said.

Editor's note: The story originally contained the incorrect sentence: Devon Energy Corp. was active in northern Canada for about five years earlier this decade, spending about $300 on exploration. It spent 300 million