By Janet Plume
While LNG project developers have flocked to Canada’s east and west coasts in recent years, a lone pioneer of Arctic shipping continues to hawk his 37-year-old dream of operating ice-class vessels year-round above the Arctic Circle.
Michael H. Bell spent 23 years from 1965 to1988 in charge of Fednav’s Arctic operations. During that time (1978-1983), he became involved with Canada’s then government-owned petroleum company, Petro-Canada, to create a trial to determine the safety and economics of Polar Class ice-breaking vessels operating in the Arctic Archipelago on a year-round basis. Called the Arctic Pilot Project, or APP, Bell knew they could operate three vessels out of the High Arctic Islands, but also knew they would be in trouble if the ships had engine trouble or needed repairs. Moreover, the region’s remoteness makes it dangerous for rescue missions.
“The most tempting resource of the Sverdrup Basin is oil,” said Mr. Bell, who was Senior Vice President at Fednav during that time. “It goes without saying that to experiment with cargoes of oil using unproven vessels in Arctic ice and winter darkness was and remains unacceptable. Petro-Canada turned to LNG as an appropriate cargo for this trial because a marine incident involving LNG would do no permanent harm to the Arctic environment.”
Petro-Canada partnered with Dome Petroleum, Nova, and Melville Shipping. The plan was to pipeline gas from the Drake and Hecla fields – the two largest conventional gas fields in Canada – on the Sabine Peninsula of Melville Island 160 kilometres to Bridport Inlet, a natural deepwater port on Melville’s southern coast, liquefy it on barges and ship it in ice-breaking tankers to Gros Cacouna on the St. Lawrence River.
The partners invested $65 million in research, engineering, design, tank-testing and economic analysis. In 1978, Mr. Bell had founded the Melville Shipping Ltd. consortium, which designed an Arctic Class, 140,000-cubic-metre LNG vessel for the APP. “We were seeking authority from the National Energy Board,” Mr. Bell said. “I am convinced that we would have received the green light, but we had to abandon the project because low gas prices rendered the project economically unfeasible.” Between the trial period and the collapse of the oil market in 1984, the price of natural gas fell from $4.50 per thousand cubic feet (Mcf), a level at which the APP could be profitable, to $1.50.
During his tenure with Fednav, Mr. Bell conceived in 1978 the M/V Arctic, the first icebreaking cargo ship strong enough to extend operations in the high Arctic during the shoulder summer months without escort. The Arctic, together with other Fednav vessels, serviced the Polaris mine on Little Cornwallis Island, and Nanisivik, north Baffin Island. He also headed up NorthWater Navigation, which delivered drilling rigs for Imperial Oil and others to Axel Heiberg and Bathurst Islands. He also was involved with precursors to Baffinland Iron Mines.
In 2004 when the price of gas recovered to top $4.50 Mcf, Mr. Bell revived interest in the project, which he named the Arctic Shipping Pilot Project. Petro-Canada rejoined the effort, which was renamed the Arctic Islands Gas Project, or AIGP. When Suncor Energy merged with Petro-Canada in 2009, the new entity wanted to focus on oil sands development, and AIGP was terminated.
“During the past decade, the price of gas in Europe has raised the possibility of a third attempt at an Arctic Shipping Project, with the U.K. or continental Europe as the closest market, and specifically copying the original APP concept, which was a trial to set the High Arctic scene for the future movement of oil,” Mr. Bell said.
His current pitch to investors pinpoints a 2019 start date, which is when Mr. Bell estimates the price of natural gas will return to the $10-$12/Mcf price range. “I accept that today an Arctic Islands LNG project, per se, is not likely to be at the top of the list of immediate projects of most oil-&-gas companies as there are numerous competing worldwide opportunities and priorities that require enormous investment,” Mr. Bell said. “An Arctic Shipping Project is likely to be economically feasible with an investment of about $4.8 billion and its implementation would eventually provide after five years of successful operation the conclusive proof that Polar Class 1 or 2 tankers can be used 365 days per year in the High Arctic without risk to the environment.”