Oil and Gas in Canada's North - Active Exploration and New Development

Approximately 40 percent of Canada's lands lie north of 60 degrees latitude. Vast areas lie beneath the shallow seas of the Arctic continental shelf and within the Arctic archipelago.

The combined land area of the Northwest Territories and Nunavut is over three million square kilometres, comprising diverse sedimentary basins, many with demonstrated high potential for oil and gas development.

During the 1980s, exploration and development in the territories slowed as the federal government and Aboriginal peoples focused on settling land claims in the North. With most of the Arctic claims settled, new global interest in Arctic oil and gas resource potential generally is fuelling re-investment in exploring Canada’s North.

Resurging Activity...

Northern oil and gas exploration and development supports economic and social components of the Government’s Northern Strategy. Working in partnership with northerners and Aboriginal peoples, government recognizes that northern oil and gas exploration and development is a key component of the future economic well-being of northern Canada.

A regularized system for annual exploration rights issuance was successfully implemented in the late 1980s in the Beaufort Sea/Mackenzie Delta region and the central and parts of the southern Mackenzie Valley beginning in 1994. Regular annual calls have since been held in both the Sahtu and Gwich'in regions of the central Mackenzie Valley and in the Beaufort Sea/Mackenzie Delta of the Inuvialuit Settlement Region. In 2000, annual calls for nominations began in the Sverdrup Basin of the Arctic Islands of Nunavut.

Today, industry is investing in new oil and gas exploration in the Mackenzie Valley near existing pipeline infrastructure at Norman Wells. Following a decade of activity on the Mackenzie Delta, companies have now expanded their focus further offshore into deep water in areas which have not been previously explored.

The Potential...

Geologically, lands extending north of 60 from the Alberta-British Columbia border to the Beaufort Sea are a continuation of the oil and gas-rich Western Canada Sedimentary Basin, but, in comparison are lightly explored. Moving into the offshore, Arctic Canada has offshore continental shelves with petroleum potential of a scale comparable to many active exploration areas around the world.

Northern Canada is estimated to contain one third of Canada's remaining potential for conventional oil and natural gas. This resource is distributed throughout the North as follows:

• Mackenzie Valley: 28 discoveries and two producing fields: the Norman Wells oil field has produced over 260 million barrels of oil since coming on full production in 1985. Since 2002, the Cameron Hills field in the southern Northwest Territories has produced both oil and gas for export to Alberta.
• Arctic Islands: 19 discoveries after fewer than 200 exploration wells; the Bent Horn field in the Arctic Islands now abandoned produced high-quality light oil for many years on a seasonal basis for shipment by tanker through the Northwest Passage.
• Mackenzie Delta/Beaufort Sea: discovered resources of in excess of one billion barrels of oil and ten trillion cubic feet (tcf) of gas in 60 significant discoveries. Industry has identified six trillion cubic feet of marketable gas in three onshore discoveries anchoring a potential Mackenzie Gas pipeline, and offshore discoveries include over 200 million barrels in the Amauligak field. On the Mackenzie Delta, the Ikhil gas discovery supplies natural gas to the town of Inuvik for power generation and domestic use.

In addition, the North has good potential for unconventional resources. Test exploration of gas hydrate accumulations beneath the Mackenzie Delta, and, more recently, industry is beginning to evaluate the potential of extensive shale formations in the Mackenzie Valley.

The Policy...

The cornerstones of the petroleum resource management regime:

• Government provides the stability industry needs by providing industry with regular opportunities to acquire new exploration rights within defined regions.
• Industry identifies specific lands to explore which are then available for competitive bid through a transparent process defined in legislation.
• A generic profit-sensitive royalty regime which recognizes the inherent risks and long time frames for discovery and development of frontier oil and gas fields.
• Industry and government work with Aboriginal peoples and northerners to strengthen northern communities by building an oil and gas sector into the northern economy.
• A shared vision of sustainable development.

In the Northwest Territories, Nunavut and Arctic offshore, the statutory responsibility for petroleum resource management rests with the Minister of Aboriginal Affairs and Northern Development.

In 1998, the Yukon Territorial Government assumed provincial-type powers to manage and regulate Yukon onshore oil and gas resources.

In 1993, all restrictions of foreign ownership at the production stage were removed, allowing Canadian companies to seek partners worldwide to develop frontier properties.

The Process...

• Industry-responsive
• Fair, open and competitive
• Independent and expert regulation of petroleum operations by the National Energy Board

The Royalty Regime...

One of the most competitive in the world!

• Low royalty payments while you recover your initial investment -- starting at 1%, rising by 1% every 18 months to a maximum of 5% until project payout
• Payout includes a fair rate of return on investment
• After project payout royalties cap out at the greater of 30% of net or 5% of gross

The Data...

• View extensive seismic database and well history reports at the Frontier Information Office of the National Energy Board, Calgary.
• Scientific expertise, core and cuttings samples from northern wells are available at the Geological Survey of Canada, Calgary.
• On-line information on well histories and geological reports in the North available from the Canada-Northwest Territories Geoscience office
• A technical report, Petroleum Exploration in Northern Canada is available on-line.
• Links to other science databases and analyses also provided through our Science section.
• Use our interactive Petroleum and Environment Management tool to explore environmental sensitivities.

Canada's North...

The time is right for partnership with northern Canadians.

The time is right to explore and develop Canada's most promising frontier.

For more information contact:

Northern Oil and Gas Branch
Aboriginal Affairs and Northern Development Canada
OTTAWA ON K1A 0H4
Tel: (819) 997-0877
Fax: (819) 953-5828