Imperial, ExxonMobil to explore Beaufort Sea for oil, gas

Imperial Oil Ltd. and sister company ExxonMobil Canada have acquired an exploration licence from the federal government to look for oil and gas in a parcel of the Beaufort Sea, the two companies announced Thursday.

The area in question covers 205,000 hectares of Arctic sea floor located about 100 kilometres north of the Mackenzie Delta in the Northwest Territories. The two companies won the licence after agreeing to spend $585 million on exploration.

Imperial and ExxonMobil are both owned by Texas-based oil giant Exxon Mobil Corp., the world's biggest publicly traded oil company and owner of the Esso gasoline network.

Calgary-based Imperial Oil is also the lead proponent behind the Mackenzie Valley natural gas pipeline proposal, which is currently in the hearing process. But company spokesman Gordon Wong told CBC News that its decision to explore offshore does not affect its stance on the proposed pipeline.

"I think you need to look at the Mackenzie Gas Project as a separate and independent project," Wong said Thursday.

"The licence that we received is strictly exploratory in nature. A lot of work still needs to be undertaken to determine if hydrocarbon deposits even exist."

Bill Gwozd, an analyst with Ziff Energy Group in Calgary, suggested part of Imperial's push into the Beaufort Sea could be attributed to the company's need to bring more natural gas online, in the hopes of driving costs down on the proposed pipeline.

"You have to have more gas offshore linked into the Mackenzie pipeline to make it go," Gwozd told the Canadian Press.

"The onshore gas will not be adequate to keep the pipeline full for 20 years."

Earlier this year, Imperial said the cost to develop the pipeline had more than doubled to $16.2 billion. It also pushed back the scheduled production start date by three years to 2014.

Companies have 5 years to start exploring

Under the terms of the Beaufort Sea exploration licence, the two companies must begin workwithin the next five years. Imperial won't be able to say when the exploration project will start until it completes detailed planning.

Even if they find nothing and don't want to continue the work, the companies have committed to spend at least $146 million.

The federal government also awarded Beaufort Sea exploration licences to Chevron Canada Ltd., for a 108,185-hectare area about 20 kilometres east of Herschel Island Territorial Park, and to ConocoPhillips Canada Resources Corp. for a 104,000-hectare zone 10 kilometres north of the Kendall Island Bird Sanctuary.

The Beaufort Sea and other parts of Canada's North have major undeveloped oil and gas potential. There have already been significant exploration and discoveries in the Mackenzie Delta, while much of the high Arctic and eastern Arctic offshore remain lightly explored.

Oil and gas exploration has a long history in the Canadian North, dating back to thediscovery ofoil at Norman Wells in 1920.