In Thursday's Guardian, BP confirmed that they will no longer participate in the next bid round for offshore exploration licences in Greenland. Apparently, both the Greenland government and BP agreed that it would not be prudent for BP to be involved in the bidding process for offshore oil and gas licenses in light of the Gulf of Mexico debacle although the Greenland Bureau of Minerals and Petroleum would not confirm the agreement. BP is currently active in other Arctic areas, primarily in Prudhoe Bay in Alaska where they have experienced a series of environmental issues related to oil spills and pipeline corrosion including a March 2006 spill of 201,000 gallons of oil. Trouble does seem to follow BP.
This development is of interest especially in light of August 24th's update from Cairn Energy where the company announced that they had discovered natural gas in thin sands at their T8-1 well located in the Baffin Bay Basin, the first hydrocarbons discovered in the basin. Cairn is currently operating two offshore rigs in the previously undrilled Baffin Bay Basin, located between the west coast of Greenland and the east coast of Baffin Island. Cairn is also active in other areas of Greenland; they have planned the acquisition of 2500 kilometres of 2D seismic in one exploration area and acquisition of 7500 kilometres of 2D seismic in southern Greenland is already underway. The two wells being drilled by Cairn are part of a four exploration well program approved by the Greenland Government for the Sigguk block in water depths of 300 to 500 metres with targeted drilling depths of up to 4200 metres.
Here's a map from the Cairn website showing their eight hydrocarbon licences in Greenland's offshore:
Greenpeace is already active in the Cairn exploration area where they have been attempting to sail their Esperanza protest boat to the offshore rigs being used to drill the two wells. A Danish Thetis-class warship was sent to confront the Greenpeace vessel outside the 500 metre exclusion zone around the Stena Don rig.
The United States Geoplgical Survey has completed several reports on Greenland's hydrocarbon potential. In its report "Assessment of Undiscovered Oil and Gas Resources of the East Greenland Rift Basins Province", the USGS concludes that the basins on the east side of Greenland contain approximately 31.4 billion barrels of oil equivalent (MMBOE) comprised of oil, natural gas and natural gas liquids. In a similar study entitled "Assessment of Undiscovered Oil and Gas Resources of the West Greenland - East Canada Province, 2008", the USGS has estimated that those portions of the Province on Greenland's west coast that are north of the Arctic Circle contain an estimated 7.275 billion barrels of oil, 51.816 TCF of natural gas and 1.152 billion barrels of natural gas liquids. This Province includes the Baffin Bay Basin where Cairn is currently drilling its two wells. From the Greenland Bureau of Minerals and Petroleum, here's a map showing the current licences that have been granted for mineral exploration for both onshore and offshore areas. To put the size of these reserves into perspective, according to the Energy Information Administration, at the beginning of 2009, the United States had proved oil reserves of 21.317 billion barrels and proved natural gas reserves of 237.7 TCF according to the Oil and Gas Journal.
Here's a map showing geography and assessment units used by the USGS to estimate the petroleum and natural gas potential of the West Greenland - East Canada Province where Cairn is active. The Baffin Bay (AU-4) unit has a mean oil reserve estimate of 1.555 billion barrels of oil and 12.272 TCF of natural gas.
In other BP-related news, in late July, ExxonMobil, BP and Imperial Oil (Canadian subsidiary of ExxonMobil) announced that they have formed a joint venture to explore for oil and gas in Canada's Beaufort Sea located off the north shore of Canada. The drilling leases are located between 120 and 150 kilometres offshore and are located in water between 200 and 4000 feet deep. Both companies will be pooling their leases and have already completed 3D seismic surveys. ExxonMobil and Imperial Oil will each hold a 25% interest and BP will hold a 50% interest. Fortunately, Canada's National Energy Board is reviewing offshore drilling operations as a result of BP's Macondo spill in the Gulf and the new joint venture partners will need approval from the NEB prior to drilling and no drilling is likely before 2014. A major problem with drilling in Arctic climates is the time taken to drill relief wells; it is estimated that it could take up to three years to drill a relief well since ice conditions preclude drilling for more than 50 to 85 days in any given year. As well, while scientists estimate that approximately 25 percent of the oil spilled from BP's Macondo well in the Gulf of Mexico has evaporated, the cold climate in the Arctic precludes that method of spill cleanup.
We'll be watching the National Energy Board in the coming weeks and months as they seek public input as they review drilling requirements and look at what safety and environmental rules are necessary before oil companies are once again drilling offshore wells in Canada's environmentally fragile Arctic.