Chevron Corporation (NYSE:CVX) has signified its intention to indefinitely halt its previous plans of drilling oil in the Canadian Arctic’s Beaufort Sea, citing “economic uncertainty in the industry” in a letter submitted on Wednesday to Canada’s National Energy Board. A number of companies have announced budget cuts for 2015 even as oil prices have continued falling for the past six months, and Chevron’s Beaufort oil project is the largest to date to be put on hold on account of the oil price slump.
Chevron Corporation (NYSE:CVX) has initially shelled out an amount of C$103 million for the right to drill EL 481 block of the Beaufort Sea, as well as on 60 percent of the other side, an area of about 206,000 hectares lying 250 kilometers of northwest of Tuktoyaktuk, Northwest Territories. In its letter to the NEB, Chevron said it is withdrawing from the hearing on Arctic drilling rules pursuant to its indefinite postponement of the project. The hearing, which is set to evaluate Chevron’s blowout response plan, should have been followed by an actual application to drill, in a two pronged procedure that Chevron has recommended itself to the NEB.
Apart from Chevron Corporation (NYSE:CVX), other companies that showed interest in Beaufort are Imperial Oil Limited (USA) (NYSEMKT:IMO) and BP plc (ADR) (NYSE:BP). Imperial Oil and BP have put their bids at C$585 and C$1.2 billion, for a right to have their own parcels to drill. Imperial Oil, which have since decided to collaborate with BP and Exxon Mobil Corporation (NYSE:XOM) regarding the matter, notes that it is setting its sight to start by operations by 2020, and is expecting to have its own blowout response plan between July and September of next year.
Chevron Corporation (NYSE:CVX) has asked the the NEB earlier in May to relax some restrictions on the drilling procedures to reduce costs, with Exxon Mobil and Imperial Oil also saying that safety wouldn’t be compromised by a more relaxed blowout rules. The arctic waters of Canada particularly requires drilling a well within the season to prevent blowouts, but the depth needed necessitates drilling the well in multiple seasons, hence the relaxation of rules sought by the companies. An estimate from the U.S. Geological Survey holds that about 90 billion barrels of oil are available at the arctic, and that the region also has one-third of the world’s untapped natural gas, as well as 13 percent of undiscovered crude.
This article has been written by Nonito Guntan.