Canadian PM puts arctic drilling on ice but leaves companies in limbo

Canadian Prime Minister Justin Trudeau has declared Canada's Arctic waters off limits for oil companies - image courtesy of Pixabay
Commercial activities will occur only if the highest safety and environmental standards are met - image courtesy of Pixabay.

Canadian Prime Minister Justin Trudeau has declared all Arctic Canadian waters off limits indefinitely, which is set to leave oil companies such as BP in limbo with regards to their exploration operations in the region.

Five companies including BP, Chevron, ConocoPhillips, Imperial and Franklin Petroleum Canada, currently hold active exploration licences in Canada’s share of the Beaufort Sea. The five companies’ arctic exploration licences in the Beaufort Sea expire between 2019 and 2023.

The Canadian PM is set to review his moratorium within the time period of the exploration licences but has recently stated that Canada is designating all Arctic Canadian waters as indefinitely off limits to future offshore Arctic oil and gas licensing. The licencing moritorium is likely to then be reviewed every five years through a climate and marine science-based life-cycle assessment.

Canada and US move to protect Arctic waters

US President Barack Obama also recently designated that the vast majority of US waters in the Chukchi and Beaufort Seas were off limits indefinitely to offshore oil and gas leasing.

The statements from both leaders follows both countries commitment in March 2016 that commercial activities will occur only if the highest safety and environmental standards are met and if they are consistent with national and global climate and environmental goals.

The Canadian PM stated that the Arctic Canadian waters were indefinitely off limits due to the vulnerability of these ecosystems to an oil spill, the unique logistical, operational, safety and scientific challenges, and risks of oil extraction and spill response in Arctic waters.

The companies with exploration licences in the Arctic waters will get a year of consultations to examine and flesh out their rights to drill in the region.

The talks between the Trudeau Government and companies looking to upgrade or renew their exploration licences is set to be a key issue in Canadian politics in 2017.

BP moves forward elsewhere

While the five companies with exploration licences in the Arctic waters have been left in limbo, BP has continued forging its operations elsewhere around the globe after agreeing to buy stakes in West African licences held by Kosmos Energy for $916m.

The acquisition of licences for four water blocks off Mauritania and two blocks off Senegal is a project that BP CEO Bob Dudley said “brings together all the elements” needed to create a new liquefied natural gas hub in Africa, as the British company looks to build its natural-gas business.

BP’s recent African acquisitions coincides with Kosmos and Cairn Energy making energy discoveries off Senegal, including the 2015 discovery by Kosmos of the Greater Tortue complex which is estimated to hold 25 trillion cubic feet of gas.

In addition to its recent African operations, BP will acquire 527 retail fuel outlets in Australia that are currently serviced by rival Caltex Australia.

BP will pay $1.785bn to Austrlian supermarket giant Woolworths for its network of adjoining Australian petrol stations as it aims to cement itself as one of the country’s biggest fuel providers.

According to BP, the company already owns 350 retial locations across Australia and supplies fuel to an additional 1,000 outlets owned by independent business partners.

CALTEX Australia said it was disappointed its fuel supply alliance with Woolworths will end after losing out to oil major BP in the battle to buy the supermarket giant’s petrol stations.

Caltex said said at the end of last year that it believed its bid for the Woolworths service stations business represented “full and fair value”, and the company had to exercise financial discipline in pursuing growth. Caltex said its $3.5bn litre wholesale fuel supply arrangement with Woolworths will remain in place until the BP deal is finalised.