Ottawa awards BP $1.2B in exploration permits in Beaufort Sea

Energy giant BP came out the big winner in the federal government's latest auction for oil and gas exploration leases in the Beaufort Sea, offering to spend nearly $1.2 billion to explore on the Arctic seabed.

BP Exploration Company Ltd. won three of five exploration leases announced late Friday by the federal Indian and Northern Affairs Department.

The leases awarded to BP cover about 611,000 hectares of the Beaufort seabed, north of Tuktoyaktuk, N.W.T., in an area believed to be rich in natural resources.

The company's largest bid $1.18 billion for a 202,380-hectare parcel surpasses the record $585 million that Imperial Oil and ExxonMobil Canadapaid last year for an exploration lease.

The two other leases went to:

• A trio of companies led by MGM Energy Corp. and includes ConocoPhillips Canada Resources Corp., and Phillips Petroleum Canada Ltd.: $1.8 million for a 41,323-hectare parcel.
• ConocoPhillips Canada Resources Corp.: $2.5 million for 196,497 hectares.

In all, the five exploration leases come with work commitments totalling more than $300 million, meaning lots of economic activity forcommunities like Inuvik and Tuktoyaktuk in the N.W.T.'s Beaufort Delta region.

"This will be a tremendous boost to economic development in the entire region," Inuvik Mayor Derek Lindsay told CBC News.

Lindsay said the majority of the jobs will be offshore, but "the exploration companies will be housed probably in Inuvik and Tuk. And the economic spinoffs are something that we've needed."

Lindsay said he also hopes the upcoming exploration is a sign that the proposed Mackenzie Valley Gas Project is closer to becoming a reality. The proposed pipeline, which currently awaiting regulatory approvals, would run from the Delta to markets in southern Canada.

But oil and gas analyst Doug Matthews said the impact this round of exploration has on the Mackenzie Valley pipeline would depend on what BP and other the companies are looking for offshore.

"I'm not privy to the information, but I would expect that these are probably primarily oil plays as opposed to gas plays," Matthews said.

"So the Mackenzie gas project may or may not go ahead on its own, moving gas from the Delta and ultimately gas from the Beaufort."

Ottawa's lease announcement came two weeks after the World Wildlife Fund called on Prime Minister Stephen Harper to postpone the auction, citing environmental concerns in the Beaufort Sea.

The conservation group had wanted Ottawa to hold off on awarding exploration leases until an environmental management plan for the sea wasin place.

But the WWF's call sparked angry responses from northern leaders, who said conservation measures already exist in the region.

On Friday, Premier Floyd Roland said he welcomes the investment in the North.