Federal government criticized over 'penny-ante' Arctic oil lease sale9/21/2012
OTTAWA - An Opposition politician says the federal government should have stepped in to block the bargain-basement sale of major oil offshore exploration leases in the Arctic to a tiny British company with few resources and even less northern experience.
"Why did the minister fail to protect this valuable resource?" asked New Democrat MP Dennis Bevington in the House on Thursday after last week's purchase of the exploration rights to 9,000 square kilometres in the Beaufort Sea to Franklin Petroleum.
Records in the United Kingdom show that Oxfordshire-based Franklin has two employees — CEO Paul Barrett and his wife. It has $200 in the bank and a net worth of minus $32,000.
Franklin bought the rights — which are in addition to two Beaufort parcels it bought last year — for the promise of $7.5 million worth of work over the next five years in a region where even an inexpensive well costs more than 10 times that.
"To award such a large quantity of offshore acreage to a piddly little company doesn't seem to be in the public interest," said longtime industry observer and analyst Paul Ziff in Calgary.
Bevington points out that the owner of the rights isn't restricted from transferring or selling them.
"What we have is a loss of control over a very large part of the Beaufort Sea."
Arctic offshore leases come under the purview of Northern Development Minister John Duncan, who did not answer Bevington's question. Duncan's parliamentary secretary, Greg Rickford, called the question "another 'gotcha' moment from the member for Western Arctic."
Previous exploration has already uncovered more than one billion barrels of oil and nine trillion cubic feet of natural gas in the region. It has the estimated potential of 5.4 billion barrels of oil and 53 trillion cubic feet of natural gas.
Bevington and Ziff also have concerns over Franklin's competency to operate in a difficult and sensitive environment.
"We're talking about one of the most environmentally sensitive areas in Canada," said Ziff. "This type of award flies in the face of public concern."
Barrett has no experience working in the Arctic and his previous company, Europa Oil and Gas, pumps a total of about 200 barrels of oil a day.
His immediate neighbours in the Beaufort are super-majors such as Chevron, BP and ExxonMobil, which have committed hundreds of millions of dollars on exploration parcels.
Barrett has said in an interview that he plans to gather seismic data on his parcels next summer if he can get space on exploration vessels owned by other companies. If he can get enough data to pinpoint a worthwhile spot for an exploration well, he said he plans to approach other energy companies for money in a joint venture by 2015 or so.
"Maybe by then we're getting some pretty big-hitting shareholders coming on board," he said. "Maybe we're man enough now to step up to the plate."
Barrett said Russian or South Korean companies might be interested.
That's no way to develop what could be a major national resource, said Ziff.
"Allowing a non-operating company to control a large chunk ... It's hard to imagine this happening in (Britain's) North Sea," he said.
"One would think there would be minimum requirements for qualifying."
— By Bob Weber in Edmonton
Note to readers: This is a corrected story. An earlier version said North Korea might be interested in partnering on Beaufort Sea leases.