Imperial Oil, BP delay Beaufort Sea drilling plans indefinitely

Imperial Oil and BPhave delayedplans to drill for oilin the Beaufort Seaoff the Northwest Territories.

In a lettersent tothe InuvialuitSettlement Region'sEnvironmental Impact Review Board onFriday morning, Lee Willis, Imperial Oil's exploration operations manager,says the companieshavesuspended all regulatory work for the project.

Theyhad hoped to begin drilling by the summer of 2020, the same year one of their twoexploration licences expires.

"However, under the current licence term, there is insufficient time to conduct the necessary technical work and complete the regulatory process," Williswrote.

Pius Rolheiser, spokesperson for Imperial Oil, saideconomic considerations such asthe price of oildid not play a hand in thedecision, which sounds about right to Doug Matthews, an analyst andformer oil and gas director for the N.W.T.government.

"Production from the Beaufort, if and when it happens, is so far in the future, even on their current timeline, that today's price of oil is not really relevant," said Matthews. "They're obviously thinking much further down the road."

Rolheiser said the companies simply need more time to plan their ambitious program.

"In a nutshell, this is all about allowing the joint venture partners the time that we believe is necessary to deliver the most technicallysound and environmentally responsible exploration program thatis possible," he said.

"And we believe that's what the people of the Inuvialuit Settlement Region expect of us."

Timeline was 'challenging'from the start

Imperial Oil and BP are in early discussions with Aboriginal Affairs and Northern Development Canada which sold the exploration rights to the companies for a combined$1.8 billionabout extending the terms of theirlicencesby several years to 2028.

"From the outset there was a recognition that, even with 2020 as the lease expiry date, it was a very challenging schedule," said Rolheiser.

Before Friday's announcement, Imperial Oil had been expected to shareits plan for how it would respond to an oil spill in the offshore withthe National Energy Board and the Environmental Impact Review Board.The plan was expected in the third quarter of this year.

A post-petroleum world?

The companiesplan to keep open their Inuvik, N.W.T. office, collect data on sea ice, andcontinue to prepare N.W.T. communities for the employment and business opportunities the project may one day bring.

Chevron Canada made a similar announcement last December, putting its plans to drill in the Beaufort Sea on hold and citing "economic uncertainty."

Matthews said Imperial Oil and BP's decision may have been partly influenced by a growing concern among energy companies with climate change, calling it a potential indication of a step toward"a post-petroleum world."

"We seem to be seeing a more serious approach towards climate change," he said. "This is part of a storyline that is starting to develop."