David Ramsay – September 17 Alaska Oil and Gas Conference: Finding Novel Solutions for Getting Arctic Resources to Market

Sep 19 2013

Dave Ramsay - Official PortraitGood morning. I appreciate having the opportunity to speak today as part of the Alaska Oil and Gas Congress about how the Northwest Territories is working to find innovative solutions to getting our resources to market. This is a topic that is of great interest to us in the NWT, as it’s never been a question of having the resources, but how to get those resources from the ground to the marketplace. I know that up next on the agenda is our lunch break, so I will promise that I will try to keep this as short as possible!

Before I get into the bulk of my remarks here today, I wanted to give you a bit of background information on the Northwest Territories and petroleum development.

The petroleum industry in the NWT dates all the way back to the 1920s, when Imperial Oil made its first discovery in the Norman Wells area. You may have heard quite a lot about the potential of this area – also referred to as the Mackenzie Valley.

There is a pipeline in this area that transports oil from Norman Wells to Zama, Alberta – connecting into the North American energy market. Since 1980, more than 269 million barrels of oil have flowed through the Norman Wells Pipeline.

Moving south, exploration and development projects at Cameron Hills have produced more than 2.5 million barrels of oil and 32.7 billion cubic feet of gas since the 1980s.

And that only represents the resources that have been developed and made their way to market.

It is no secret that the Northwest Territories has vast pockets of oil and gas that have garnered considerable interest in recent years. Estimates are that the NWT could hold as much as 37 per cent of Canada’s marketable light crude oil resources and 35 per cent of the Canada’s marketable natural gas resources. Even in the face of our great potential, there is one challenge that remains unsolved – how to get the resources into the global market – which is the question we all want answered, and the focus of my remarks in a few moments.

With our natural gas exploration and development hampered by the continued delay on the construction of a pipeline to southern Alberta, one might think that the resource development sector in the NWT would be severely scaled back. However, this is not the case.

The Canol shale play remains one of the brighter lights for our future development. Already creating quite a stir in the Norman Wells area – which sits pretty much right in the centre of the NWT – has more than 1.2 million acres of land offered up for petroleum exploration and development.

Major players in the industry have pledged more than $630 million in work commitments in the region. In the past few years, the town of Norman Wells, as well as many other communities in the central Mackenzie Valley and beyond, have seen the level of exploration activity, employment and business spending increase dramatically.

And in many ways, these numbers are only the beginning of unleashing the potential of the central Mackenzie Valley. In June 2013, the Government of Canada announced a new Call for Bids in progress covering another 1.1 million acres of land that closes at the end of September.

The hydrocarbon potential of the NWT is not limited only to the centre of the territory. Major players including Imperial and ConocoPhillips have returned to the Beaufort Sea offshore region to once again look at the potential oil reserves in the Arctic Ocean, and have made more than $1.8 billion dollars in work commitments.

A number of other companies are also taking a second look at the vast potential of the Arctic Ocean region, which according to data from the United States Geological Society, could hold nearly one-quarter of the undeveloped resources in the world.

So – it’s clear the region’s future is bright. But we have all learned to get our hopes up too high by what has happened in the not-so-distant past.

With the Mackenzie Gas Project stalled for the foreseeable future, and with almost $1 billion committed to exploration and related seismic activity in the Canol Shale formation of the central Mackenzie Valley – not to mention what will be spent on work in the Beaufort Sea region – the NWT is once again faced with a long-standing question – now that the resources have been discovered, how do we get them to market?

For many years, the plan for transporting our resources to the markets in southern Canada – our natural gas in particular – was the Mackenzie Gas Project. As some of you in this room will no doubt know, the MGP was viewed as a one-of-kind opportunity for the NWT. And the MGP really only focused on the reserves in two anchor fields – representing only a portion of 81.2 trillion cubic feet of natural gas that lies underneath the Mackenzie Delta – this would surely be only the beginning. It has been widely known that this gas is there, and has been sitting undeveloped for more than 40 years.

Aside from the issue of having limited pipeline capacity, the glaring lack of infrastructure continues to hamper the progress in the oil and gas industry in the NWT. Roads, waterways, rail service all exist in the NWT, yet cannot guarantee smooth transportation to the marketplace.

There are railroad tracks in the NWT – but they are located in the southern part of the NWT and still remote from the oil and gas interests that are being developed and those that companies are looking to develop. Highway infrastructure is also lacking – and the fact that there is no highway that extends to Norman Wells and the central Mackenzie Valley area has acted as an obstacle in getting resources to market.

However, the challenges we in the NWT have in getting our resources to market are not unlike the challenges some of you in this room are currently facing. I am sure many of you have been involved in projects that had everything going for them – except for a simple and cost-effective way to get the product to market.

In many ways – our options are extremely limited. And that comes down to pipelines.

History has shown us that pipeline infrastructure is the most effective way to get resources to those markets where they are most needed. For many years, the common thinking has been that oil and gas had to travel south to get it to market.

But at a time when unconventional oil is becoming the norm, perhaps now is the ideal time to examine unconventional methods of reaching the global energy market.

And herein lays our greatest challenge – reaching the North American energy market.

We continue to look to constructing a pipeline through the Mackenzie Valley, but what has become abundantly clear is that we must not limit ourselves to examining only one option.

One of our options could be to construct a pipeline that travels north which would serve both our offshore potential and that of the central Mackenzie Valley. Heading north could allow for the construction of a pipeline that could also serve the needs of the Alaskan North Slope or perhaps navigating the Arctic Ocean.

Short open water seasons, dangerous conditions, and the overall expense of shipping in the Arctic means shipping oil and gas from the Arctic using tankers is not cost-effective. However, the sea lanes in the Arctic Ocean now remain navigable and at some times of the year, completely open for longer periods – even for just a few more days. Meaning that crossing the Arctic Ocean and sailing the Northwest Passage – a dream of explorers for more than half a century – doesn’t seem that far-fetched.

Travel through North Sea routes would also cut down on tanker travel time to Asia. And saving time means saving money, which is good for any kind of project, whether in the Arctic Ocean, or tropical waters.

If not north, then going west is another option. We could tie into the Trans-Alaska Pipeline System. The amount of product that is being moved through the pipeline has been declining by more than five per cent every year since 1988, when the throughput hit two million barrels every day. Less and less oil – which means slower-moving and colder oil – is moving through this same pipeline. In fact, the current daily throughput is already lower than it was when the pipeline was first put into operation back in 1977.

But it is about more than building pipelines that concerns the NWT.

Our focus needs to move to transportation in all its forms – and in all directions – to ensure that we have more than one option for getting oil and gas from the places it currently lays to where our oil and gas reserves are most needed.

We have also been discussing the possibility of working with Alberta to create a solution that will not only allow us to get our product to markets, but also to allow Alberta to get its resources in the oil sands to the market by heading north.

Our search for innovative solutions requires more than forward-thinking ideas and bright plans for the future. In developing the infrastructure and systems to assist with transportation of resources to market, we must act now. We cannot wait any longer to put critical northern infrastructure in place.

Companies working in the NWT today are beginning to realize the need to find new and innovative ways to get northern oil and gas to the markets where it can help meet the growing demand. They can’t wait for the roads to come to their projects – and are building roads of their own.

All the roads being built – whether by petroleum exploration companies or through joint funding projects with the Government of Canada – are heading south. In 2012, work began on a highway from Inuvik to Tuktoyaktuk towards the Arctic coast.

Building a road that heads further north may seem the most logical direction to take, and is yet another step in developing the important elements that will be critical in planning for a strong and vibrant future of the petroleum development industry in the NWT.

The Government of the Northwest Territories strongly supports environmentally sustainable oil and gas exploration and development in our territory. With collaboration, cooperation and ingenuity, we are confident that we will find a solution so that our valuable resources will find their way to hungry markets.

Ultimately, the solution to our current situation will come from what may seem like an obvious place – from those who live and work in the NWT. As of April 1, 2014 decisions relating to NWT lands and resources will no longer be made by the Government of Canada – but by the Government of the Northwest Territories.

So – when it comes to the future of oil and gas exploration and development, the choices will be made by those who will be directly affected by continued development of our oil and gas reserves.

Someone in this room here today might have the piece of information that helps another jurisdiction find solutions to issues they are facing. Sharing knowledge and expertise in a forum like this benefits us all.

The petroleum development industry in the NWT has long held great promise for NWT businesses and residents alike – yet has failed to live up to its potential. In times past, the question of the overall economics of a project moving forward or the fact that the infrastructure wasn’t in place to ensure the resources could find their way to market has severely hampered petroleum development in the NWT.

Now – perhaps more than ever before – there is the potential for the oil and gas industry in the NWT to flourish. Just look at the increasing interest in the Canol shale play in the central Mackenzie Valley. Although still in very early stages of development, this area is poised to lead the way in petroleum resource activity in the NWT for the foreseeable future – and yet once again, the question becomes: “How can we get this valuable and needed resource to market?”

By looking for new ways to reach the marketplace today, the NWT is paving the way for a bright future for oil and gas exploration. And by making changes now, we can be sure that our future opportunities will not be limited to the tried and true methods.

We are looking to a future in which the NWT will have a firm position in the global marketplace – and no path will be overlooked. In working with our northern counterparts both here in Alaska and in other parts of the Arctic Region, we look forward to a day when the question will no longer be “How are we going to get there from here?” – That will no longer be the issue.

It’s only a matter of time before we all find the solution.

Thank you for your time today. Enjoy your lunch.