Developer's Northern view goes south
New survey suggests NWT faces uphill battle attracting petroleum investment
Walter Strong
Northern News Services
Published Monday, December 8, 2014
NORTHWEST TERRITORIES
The NWT still has a perception problem, according the Fraser Institute's 2014 Global Petroleum Survey published late last month.
Out of 156 petroleum development and exploration jurisdictions worldwide, the NWT ranked 77, down from 61 last year.
Among Canadian jurisdictions, the NWT ranked second last, placing only ahead of Quebec, with the NWT sharing a similar profile to Yukon. Nunavut was not included in the survey.
The survey and rankings were compiled based on responses from 710 interviews representing 563 petroleum industry companies.
"The best features (in the NWT) were the legal system, security and a lack of trade barriers," said Kenneth Green, Fraser Institute senior director and survey director.
"The worst features were disputed land claims, the quality of the infrastructure and uncertainty about protected areas."
The survey, Green said, would have taken into account the lead role the GNWT took in petroleum development with territorial devolution last April.
"The executives that we surveyed would be aware of the devolution issue," Green said. "The judgments expressed would include a reflection of that."
Given the current global slump in oil prices, Green said it is critical that policy be seen to encourage exploration in the North, a relatively expensive proposition thanks to short exploration seasons and the high cost of Northern exploration.
"The NWT is a marginal cost competitor - that is (to say) you're not highly competitive at new oil prices. It's more important than ever that the regulatory framework and the fiscal terms be in place to optimize the NWT's ability to bring oil to market in a competitive way."
The NWT has impressive petroleum reserves, Green said, but because it can't do anything about the world price of oil, the territory has to look at other ways to attract investment.
"You can't affect the world price of oil, and your reserves are what you have, but you can improve the regulatory climate," he said.
"There are concrete steps that can be taken," Green said.
"The government can ask, how do our royalties look compared to others, what can we do to facilitate infrastructure development, how do we communicate to the industry that we're interested in having investment in the area and we want to facilitate that?"
The GNWT has been aggressively burnishing its image as a jurisdiction for petroleum investment.
For example, since devolution, the government has opened a new Petroleum Products Division office in Inuvik, undertaken a re-write of NWT fracking regulations (not yet complete) and attended global petroleum conferences and trade shows.
There are no active petroleum exploration projects in the territory right now after both Husky and ConocoPhillips temporarily suspended drilling in the Sahtu, but neither company have publicly blamed the regulatory environment for their decisions.
"The Fraser Institute's Global Petroleum Survey shows us that there is tremendous opportunity for the Government of the Northwest Territories to work with regulatory partners to clarify and improve the Northwest Territories regulatory system for potential investors," stated Industry, Tourism and Investment Minister David Ramsay in an email to News/North.
"Infrastructure projects, such as the completion of the Mackenzie Valley Highway, will help resolve some of the high cost associated with resource development in the NWT."
The GNWT is developing a "forward-thinking" oil and gas strategy, Ramsay added. It will "provide a clear path forward for the petroleum industry, and support our competitive position by promoting investor confidence in the petroleum resource industry."
Not surprisingly, Alberta ranked highest in Canada in the survey.
A new feature of the survey was that it provided a separate ranking of jurisdictions which ignored proven oil and gas reserves, focusing instead on survey responses alone.
According to that method, Saskatchewan ranked first in Canada (third in the world), with Manitoba and Alberta following in second and third respectively.
The NWT still placed second last, after Yukon, but ahead of Quebec.
