Quick — which is the U.S.’s biggest supply of non-OPEC oil?
Canada — according to the U.S. Energy Administration, the United States total crude oil imports now average 9.033 million barrels per day (mbpd), with Canada sending 2.666 mbpd southward to the U.S., making it America’s top source of oil imports.
But relations between Ottawa and Washington have been strained recently, not least because of the stymied Keystone XL, with the conservative Canadian government of Prime Minister Stephen Harper, stung by the environmentalists’ opposition to the Keystone XL pipeline sending Alberta’s oil sands southward to U.S. refineries on the Gulf of Mexico angrily threatening to send Canadian future energy production exports westward for exports to Asia, particularly to China.
But prime ministerial unhappiness aside, the U.S. remains Canada’s best energy market, and Harper’s government knows it.
Want proof? Look no further than the quiet research done over the past half-decade by Houston-based ION Geophysical Corp., which since beginning in 2006 has spent more than $150 million compiling hydrocarbon data using advanced seismic and gravity equipment to identify potential oil and natural gas deposits in Canada’s Arctic Beaufort Sea, capturing more than 14,000 miles of 2D seismic data in the Beaufort-Mackenzie basin from a research vessel towing a 5½-mile-long cable equipped with seismic equipment.
The result of the company’s research in the Great White North? According to ION Geophysical Corp., “a world-class play.” ION Geophysical has recouped its investment costs and then some, although the company modestly declines to say how much, by selling their data to interested energy companies.
Never mind that the Beaufort Sea, lying north of the Northwest Territories and west of Canada's Arctic Islands, is one of the most isolated and inhospitable regions of the world. The Beaufort Sea is characterized by severe climate and is frozen over most of the year, with only a narrow 60-mile-wide passage opening up along its shoreline in August and September. Although more than 400 wells have been drilled in the north and 65 petroleum fields indentified, barely a trickle of oil and gas has made it to market.
But if that’s the down side, then the up side is that ION Geophysical’s data combined with previous studies by other Artic nations, including Norway, Russia and the U.S. indicate that the Arctic Ocean area may hold up to 25 percent of the world's untapped crude oil and natural gas deposits. In 2008 BP committed $1.2 billion (Canadian) to drilling in the Beaufort, a decision that was based on ION Geophysical data; and after reviewing their materials, Imperial Oil Ltd. and Chevron Corp. also made large Beaufort Sea lease bids.
But wait, there’s more. Harper’s government has placed 3,500 square miles of the northern offshore Beaufort Sea up for bids, clearing the way for energy companies to snap up explorationrights for an area half the size of Lake Ontario.
The Beaufort Sea’s potential has led South Korea’s Ministry of Land, Transport and Maritime Affairs to conclude an agreement with Canada to conduct joint research in the Beaufort Sea within Canada's exclusive economic zone (EEZ). Accordingly, Seoul will soon dispatch South Korea's first icebreaker, the 7,487-ton Araon, to conduct research. Speaking on condition of anonymity a ministry official said, "Exact details have to be worked out with Canada, but the Araon should begin exploration in the summer of 2013."
Possible U.S.-Canadian friction clouding this otherwise sunny picture? The Beaufort Sea is divided between Canada and Alaska and constitutes a long-time maritime border dispute complete with on-going negotiations. On the Alaskan side of the maritime frontier, on April 27 Shell Chief Financial Officer Simon Henry told financial analysts during a question and answer session following the company’s presentation on its first quarter 2012 results that the company was gearing up to dispatch two drilling vessels and 35 support vessels for drilling in the Beaufort and Chukchi seas later this year, noting that a number of them are already either in Alaska or are on their way to the state, adding, “It’s a huge logistical exercise.”
In the year of the bicentenary of the War of 1812, it seems indeed ironic that the U.S. and Canada may once again be preparing to square off, this time over energy disputes and maritime frontiers. The final twist to the story is that global warming in shrinking the Arctic polar ice has made these areas available for exploration.
John Daly is CEO of U.S.-Central Asia Biofuels Ltd.
—This story originally appeared on Oilprice.com.