Costly Search at the Ice Cap Goes On : Oil Abundant in the Arctic but Hard to Attain

Searchers for oil are used to hard conditions--desert sands, raging seas--but no obstacles seem as difficult as those that stand between the drillers and the oil beneath the Arctic ice cap.

Still, the search goes on in the Northwest Territories, from this hamlet of 800 people on the edge of the frozen Beaufort Sea to the very top of the world.

It is an effort that covers an area half again as large as the United States, has cost billions of dollars over the past 15 years or so--and has not produced a single barrel of oil for the market.

Yet a promising strike last fall in the Beaufort renewed hopes that there is an ocean of oil beneath the North Pole, and this has been enough to push the searchers on, despite temperatures of 50 below zero, shifting ice and falling oil prices on the world market.

The oil companies are spending astronomical sums of money in their search for the oil that they believe lies hundreds and thousands of feet below the surface. The most promising drilling site is Amaukigak, where Gulf Oil reported a major oil and natural gas strike last September. Gulf was not prepared for midwinter drilling and therefore shut down until late spring. Jim Livingstone, Gulf’s Beaufort project manager, says the field may contain 400 million barrels of high-quality oil.

Esso, which is working through the season, Dome Petroleum and several other companies also report likely finds in the area. Industry sources reported last week that Esso may have found as much as 100 million barrels in a new strike about 50 miles northwest of here. Esso officials declined to confirm or deny the new find.

In all, geologists think, the Beaufort and the nearby Mackenzie Delta fields may contain more than 3 billion barrels of oil. In addition, Panarctic Oils Ltd. says it is drilling into fields with almost 500 million barrels in the high Arctic, including the North Pole area.

Superhuman Effort Needed

Combined with proven finds in Alberta and the wells in the Atlantic Ocean off the Maritime provinces, the Arctic reserves give Canada the potential to be one of the world’s major exporters of oil over the next 30 years. Today, Canada imports about 15% of the oil that it needs, though it is a net exporter of energy because of natural gas and electric power production.

As impressive as the forecasts are, what strikes, almost stuns, a visitor to the Beaufort Sea is the virtually superhuman effort needed to reach the oil, and the expense involved.

According to Livingstone, Gulf alone spent $674 million in the area last year. Each well costs almost $100 million, which is nearly 50 times the cost of a well in the Gulf of Mexico. A barrel of oil from beneath the Beaufort could be 30 times more expensive than a barrel of oil from Saudi Arabia.

Much of the cost goes into equipment specially designed for use under Arctic conditions. Gulf, for example, has built four ice breakers that run to $25 million apiece. Their 25,000-horsepower engines and heavy hulls can drive them through ice nearly 20 feet thick at a speed of 3 knots, and this makes them capable of operating more than half the year.

And there is the Kulluk, a $110-million drilling platform that looks like a gigantic hockey puck 265 feet in diameter and costs $800,000 a day to operate. It can withstand severe ice conditions.

But even the Kulluk is vulnerable. Last December, an ice floe five times the size of Staten Island drifted toward the Kulluk while it was putting down a well. When the floe was less than two hours away, the Kulluk was towed away. Gulf executives feared for the lives of the 108 men working on the platform.

“We don’t want a repeat of the Ocean Ranger,” Murray Horn, a Gulf official, said, referring to the drilling platform that capsized off Newfoundland on Feb. 15, 1982, with the loss of all 84 men on board.

As powerful as the Kulluk is, it cannot cope with the ice for more than 165 days a year. But Gulf and Esso have both developed technology for drilling the year around, by means of platforms that are, for all intents and purposes, artificial islands.

The Gulf version, called the Molikpaq, is the size of two football fields. It is filled with tons of sand dredged from the sea bottom and can resist any ice pressures experienced in the area.

Besides the cost of equipment is the expense of the people who do the actual work. About 500 people staff the Gulf ships, platforms and the Tuktoyaktuk base camp, working on a two-weeks-on, two-weeks-off basis. Livingstone said the annual payroll is $7 million, plus $20 million to provide goods and services for the workers. Among the services is a base camp that houses 130 people in luxury. It offers saunas, squash courts and satellite TV.

Not Entirely Welcome

Despite all the potential for wealth, not everyone welcomes the oil searchers. The fear of an environmental disaster is a constant factor in any discussion about the area, although it is a bit less intense than it was a decade ago, when a federal commission ordered a hold on development of a pipeline in the Mackenzie Delta area.

Even though the oil companies insist that there is little danger of a serious blowout or leak below the ice, and even though they can point to years of experience without a major accident, government officials still worry.

In a report issued in 1983, Environment Canada, a semiprivate agency, said that a Beaufort oil spill is likely and “will entail significant risks to the Arctic environment.”

The concern is that a spill beneath the ice would be impossible to clean up with existing technology and that the oil would spread and pollute huge areas with a very delicate environment.

Scientists testifying before the federal commission said there have been eight blowouts or loss of control in about 100 exploratory wells in the Beaufort Sea in recent years.

Environment Canada predicts that, in a medium-production field, one pumping 700,000 barrels a day, there could be at least one, and perhaps two, significant spills of 5,000 barrels in the project’s lifetime.

Gulf’s Livingstone denies such a probability. He says the Beaufort project has been safer than any other offshore operation.

But of more concern than the environment to many critics is the cost of the oil search, particularly at a time when Canada is in economic straits and the price of oil is at its lowest in 10 years and falling.

Since 1981, the Canadian government has provided $1.5 billion in subsidies to oil companies, along with huge tax write-offs. The oil companies themselves already have invested billions of dollars in a project that is expected to cost $60 billion before it is completed.

According to Peter Burnet, executive director of the Canadian Arctic Resources Committee, “Canada cannot afford either the misallocation of economic resources to northern oil drilling or the continued hemorrhage of government funds to support it.”

Specially Designed Tanker

And even with all the geologists’ predictions of huge Arctic oil reserves, not one barrel of oil has been shipped from the area.

The experience of Panarctic suggests the difficulty of getting the oil out, even in an area with proven reserves. The company intends to bring in a specially designed tanker reinforced against the ice to take out 100,000 barrels of oil at a time. Company officials admit that, at that rate, it will take 10 years to break even on their $750-million investment.

Nevertheless, the oil companies keep at it. And the native people who own most of the land along the Mackenzie River have agreed to the construction of a pipeline from the Beaufort to connect with an existing pipeline at Norman Wells some 250 miles to the southeast.

Engineers are working on supertankers that can operate in the Arctic most of the year. They even talk about submarine tankers that can approach drilling fields from beneath the ice.

“At best,” Livingstone said, “it will be the 1990s before we can bring Beaufort oil out, but we’re going to bring it out.”