Nunavut officials envy Greenland oil-gas model

Gordon MacKay, an assistant deputy minister in Nunavut’s Department of Economic Development and Transportation, presents a slide show to an audience of international journalists visiting Iqaluit Feb. 5. (PHOTO BY JIM BELL)

Because of regulatory confusion and federal government apathy, Nunavut lags far behind its circumpolar neighbour, Greenland, in the scope and pace of oil and gas exploration, a Government of Nunavut official said in Iqaluit last week.

Gordon MacKay, an assistant deputy minister in the GN’s Department of Economic Development and Transportation, made the remarks in a talk given during a speakers’ forum held at the same time as last weekend’s G7 finance ministers meeting in Iqaluit.

“This [Nunavut’s oil and gas reserves] is probably one of the largest and there is nobody working it,” MacKay said.

But oil and gas exploration in Nunavut came to a halt in 1985, and there’s no sign of it starting any time soon.

MacKay said this is due to many factors:

• complicated regulations that apply different regimes to land-based exploration activities and offshore activities;

• confusion over which companies own which historic discovery licences, a situation that dates back to the 1970s and 1980s, when companies made complex deals with each other to pay for exploration;

• an absence of commitment by the federal government — the Department of Indian Affairs and Northern Development, for example, has no employees in Nunavut devoted to oil and gas issues;

• though some Nunavut offshore oil fields could be profitable at world prices as low as $75 a barrel, established energy firms prefer to invest in known regions like Alberta;

• without a devolution agreement, there’s no local political control over oil and gas issues in Nunavut.

In contrast, Nunavut’s circumpolar neighbour, Greenland, is forging ahead with the development of offshore oil and gas fields on its side of Baffin Bay and Davis Strait.

Later this year, Cairn Energy, an exploration firm based in Edinburgh, Scotland, will start exploratory drilling for oil off the coast of Greenland, near Disko Bay, using two advanced drill ships, the Stena Forth and the Stena Don.

For Greenland’s home rule government, the lucrative royalties that could flow from oil and gas development are crucial for gaining more independence from Denmark.

When Greenland’s oil and gas revenues reach a level that is double the amount of its block funding grant from Denmark, Greenland may seek full independence under the self-rule deal that came into effect June 21, 2009.

But in Nunavut, there is no similar incentive. MacKay said that for Nunavut, decisions about Arctic oil and gas development are made by politicians whose political base lies in southern Canada.

And because Nunavut has no political control over oil and gas development, Arctic exploration is assigned a low priority.

In his talk, designed for an audience of international business journalists and government officials, MacKay reeled off some impressive figures on the size and value of Nunavut’s known oil and gas reserves.

The Sverdrup Basin area of the High Arctic is believed to hold between three and seven billion barrels of oil and between 47 and 123 trillion cubic feet of natural gas.

And the Baffin Bay area is estimated to hold 2.5 billion barrels of oil and up to 25 trillion cubic feet of natural gas.

Davis Strait and Hudson Bay also contain big known reserves of oil and gas.

But only one commercial extraction project has ever operated in Nunavut, from the small Bent Horn oil field on Cameron Island.

There, a company called Panarctic pumped out small quanties of light crude oil, then shipped it south on the MV Arctic.

Unrefined oil extracted from Bent Horn was used to fuel electrcial power generators at Resolute Bay and the Little Cornwallis lead-zinc mine, but Panarctic shut the project down in the mid-1980s.