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Gaining momentum

Gaining momentum


It was wide open, every oilman for himself. That’s how Karl Kenny recalls petroleum exploration in the Canadian Arctic during the early 1980s. Fresh out of the navy in 1981, he signed on with Panarctic Oil. “There weren’t the same concerns for safety or the environment as there are today,” he said in a telephone interview from his St. John’s office.

“We were drilling through the ice at 78 degrees north. And we were just one of more than 100 camps,” said Kenny, who is today president and CEO of Kraken Sonar Systems Inc. “There was no internet and no cell phones and Apple II was cutting edge.”

That frontier activity by Canadian companies such as Panarctic, Dome Petroleum and Petro Canada was driven by substantial federal tax write-offs in the 1970s and by National Energy Program incentives in the 1980s. Under those programs, the national operators invested billions drilling more than 170 wells, including 125 offshore on the continental shelf.

“There was a lot of discussion in those days about how to move the oil under ice. It was good money and interesting stuff,” said Kenny. But when the federal programs dried up, the wells were plugged and abandoned. The finds were not enough to justify development due to the formidable challenges of extreme weather, ice, lack of infrastructure, and the difficulties of service and supply in such a vast and uncharted area.

Today those challenges are further complicated by lower global oil prices, sanctions against Russia, sovereignty issues and aboriginal rights, climate change and growing concerns about environmental impact and the vulnerability of the region. But no oil and gas company can take the Arctic out of its play book. At six per cent of the earth’s surface — an area equivalent to the African continent — the Arctic is incredibly rich in fossil fuels, holding an estimated 22 per cent of Earth’s oil and natural gas resources in 25 geologically defined areas.

In 2008 the U.S. Geological Survey estimated there was 90 billion barrels of oil, 1.669 trillion cubic feet of natural gas and 44 billion barrels of natural gas liquids in the Arctic. Two-thirds of the total area of the Arctic is offshore. This area is evenly split between the very lightly explored continental shelves and the unexplored deep waters.

Gaining the edge
One thing that has changed in the Arctic, however, since the last play in the second half of the twentieth century is the increased activity in other sectors such as shipping and tourism. This is aided by mind-numbing advances in technology since the 4K RAM of the Apple II, and by the shrinking polar ice cap which is retreating at an estimated five kilometres a year.

According to those at the helm of a growing cluster of marine technology companies in Atlantic Canada, this pause in exploration will clear the path for a new technology-enabled push into the far north. Far from being daunted, they see the challenges as business opportunities.

“The Arctic is still expensive and painful to get to,” said Kenny. And only three per cent of the seabed has been mapped. Two years ago, Kraken had sensors deployed in the successful mission to discover the lost 1845 Franklin Expedition. “During that trip we were using sea bed data from earlier mapping expeditions by the same Sir John Franklin.”

Not surprisingly, Kraken is actively investigating high endurance and long-distance seabed mapping in the Arctic. “Kraken has the sensors to capture the high resolution data and we are looking at a suitable robust robot to mount them on,” he said.

Petroleum Research Newfoundland and Labrador (PRNL) funds and facilitates offshore petroleum-related research with investments from members Chevron Canada, ExxonMobil Canada, Husky Energy, Statoil Canada and Suncor Energy. Judging by the projects funded by members in recent years, the focus has shifted from the more expensive research (such as ice load on fixed structures) to work on integrated operations and efficiencies and the opportunities that can flow from that. And with the discoveries in the deep water of the Flemish Pass, there’s more interest in understanding the mid-ocean environment. Data collection on extreme weather, on currents and their effect on iceberg drift and on oil slicks seem to remain as priorities. Of course, any advances in these areas have indirect implications for eventual operation in the Arctic.

Locally, operators, through various means, continue to support training and research facilities to improve health and safety.

Falck Safety Services Canada provides certified safety, rescue and survival training to the offshore industry. In 2015 they opened their new centre in Mount Pearl. In addition to an underwater escape trainer, a survival training simulation theatre, and offshore abandonment systems, the centre includes research facilities.

Hibernia Management and Development Company Ltd. and the Research & Development Corporation (HMDC) partnered to invest more than $16 million in a new helicopter training and research and development centre (also in Mount Pearl). It will be operated by CAE, a Canadian provider of training and simulation technologies. HMDC will contribute the lion’s share of $13 million to the centre and its helicopter simulator system. RDC’s contribution of $3.3 million will and fund five research projects and cover the cost of the new simulation system — which according to a press release from the provincial government, will “provide unprecedented realism for offshore facilities and local weather conditions, and will feature the first approved helicopter simulator with night vision capability in Canada.”

Opportunity on the radar
Among the R&D companies that have partnered with operators and agencies is Provincial Aerospace Ltd. (PAL). Stephen Green, the general manager for PAL’s environmental services division, sees this pause in the gold rush for the Arctic as a strategic advantage. “PAL is the premiere ice management company and we are in the Arctic routinely. When our phone rings it might be from Greenland or from Russia. So it is in our interest to be involved internationally,” said Green.

“This drop in the price [of oil] and the refocusing of operators on areas outside the Arctic give the private sector more breathing room and enable us to develop technologies that can meet the demand by oil and gas operators when they’re ready.”

As the Canadian chair for the ISO committee drafting operational Arctic oil and gas standards, and as vice chair for its working group on ice management, Green has a front row seat on the challenges faced in the Far North.

“I meet with the other delegates twice a year for ISO,” he said. “So I know that the international community is on the same page in terms of the opportunities for technology support in the Arctic.” He said that the other countries support a lead role for Newfoundland and Labrador. “I’ve talked to the lead delegates from numerous countries and a lot of them are buying the (idea of a) gateway to the Arctic and there is consensus that that should be St. John’s,” said Green.

Among PAL’s research projects is one to apply technologically enhanced radar to map the thickness of ice. This could be a game changer for Arctic exploration. “With proper ice management we can reduce pressure loads on platforms,” he said. But the applications for such capabilities don’t end there. Mapping ice thickness could also help improve oil spill modelling in the Arctic, guide the effective positioning of ice breakers for shipping, and aid the expanding marine tourism industry for companies such as Crystal Cruises.

“Our Night Flash System, using radar from fixed wing aircraft, would take night imagery that could be developed to show ice thickness,” said Green. The feasibility and initial engineering have already been completed and they are planning to start testing a prototype in the winter of 2017.

Another local company with international connections that is capitalizing on the value of enhanced radar in the Arctic is Rutter Inc. Fraser Edison is president and CEO.

Research and development at Rutter is aligned with evolving standards. Their sigma S6 Ice Navigator system was selected this past April for Magne Viking, the first vessel to comply with the International Maritime Organization Polar Code.

“Our system improves real time route planning and decision making in ice operations,” said Edison during an interview at his office overlooking the Waterford River in St. John’s. He revealed that Ice Navigator is in use on many of the world’s ice breaker fleets, tankers, research vessels, bulk carriers and coast guard vessels operating in the Artic region. And the system is also used as an ice management solution by oil and gas companies to increase the safety and operational time of offshore platforms, drill ships and support vessels.

Rutter’s research and development program, valued in the millions annually, has been able to do much more with the sigma S6 system. “We were in the Kara Sea two years ago supporting Exxon with our sigma S6 radar system with capabilities not only for ice detection but also for oil spill detection and for wave height tracking,” said Edison. “Operators want to be able to identify sea conditions so they can track individual waves. That has implications when you are lifting heavy objects between platforms at sea. You want to know how long you have before a wave is going to reach the operation.”

Safer, more cost-effective exploration
Edison is on the board of the Research and Development Corporation of Newfoundland and Labrador (RDC) a provincial Crown Corporation which supports local R&D. Since 2009 it has helped fund 717 research projects investing $128 million and leveraging $325 million from other partners.

Steve Mercer is RDC’s director of business and development. “The Arctic has gone cold from an investment perspective, but this slowdown creates a window for technology companies to advance Arctic-focussed research,” he said when contacted by telephone. “What we do over the next 10 years in this province will make operations in the Arctic safer and more cost effective.” The findings bear this out. According to an analysis of the projects that RDC has supported between 2009 and 2016, there is a steady increase of projects concerning ocean technology and energy.

Mercer believes the key to lowering the cost of Arctic production is knowledge. “Companies offshore need improved communications and real time data analysis to deal with ice and iceberg conditions and seafloor mapping and pipeline management,” he said. As technology offers ways to meet those challenges and reduce costs, it empowers operators to move north in a safer and more cost effective way. “The more connected and the more integrated offshore and onshore are in the Arctic, the better you can forecast the changing conditions.”

Even a glance at the RDC website’s R&D project list reveals dozens of petroleum-focused projects that have been funded since the price of oil began to slip. Among these is Frontier Subsea’s remotely operated mooring inspection tool. Chad Fowlow is the concept development and technology lead.

The company started in 2013 when five graduates of Memorial University saw a niche in the local market: subsea engineering and the inspection, repair and maintenance of subsea facilities for aging assets that need attention.

“Subsea service providers locally are geared to multi-million-dollar development, but we target smaller jobs, the actual cost depends on water depth and whether or not mooring chains are used,” said Fowlow.

“We are eager to pursue opportunities in the Arctic but that is longer-term. That is not our focus today,” Fowlow admitted. Their approach seems to be that if they can get it to work here and prove the technology, then the Arctic or any other marine environment is a potential market. “We will develop the technology to support activity here that also gives us access to international market opportunities.”

Frontier Subsea is currently developing a prototype for mooring inspection and they are engaging with local operators to test the technology prototype.

“When we perfect it, there are many opportunities worldwide to export that technology,” said Fowlow. “Sea trials could be as soon as 2017 if the support is there and if the appetite of local industry remains strong,” he said.

Fowlow also revealed that the company is working on a subsea well protection innovation. Today the industry is protecting well heads in glory holes in the sea bed that can be as much as 10 metres deep. “Theoretically these protect underwater installations from iceberg scour,” said Fowlow. But that is a significant cost and scheduling risk that impacts project feasibility. “So if we can justify a system that doesn’t require glory holes then that makes borderline prospects more attractive to development,” he said.

A model for success
Despite local criticism of a changing business model that includes increased fees for services charged by civil servants who, critics say, don’t understand the needs of small business, the National Research Council (NRC) is nevertheless recognized as a cornerstone of local R&D. Jim Millan is the director of Research and Development of NRC with two offices — one in St. John’s and one in Ottawa (where he was at the time of this interview in late July). “If you were to go back and look at the risks operators took in those early days of exploration in the north, for things like loss of life, oil spill containment, the bar has been raised significantly,” he said. “And one way to meet the new requirements is through technology.”

Millan said the NRC partners with companies and with regulators. “As an agency, we help ensure the highest standards for every kind of operation systems in place. If a regulator needs to know if a proposed development meets established guidelines, or if a vessel underwriter wants to know if it makes sense economically to insure a company planning to operate in the far north, NRC can provide assurances,” he said.

“We are constantly looking for companies to envision the possibilities of our research and we are prepared to work with them if we are going to get a good product,” said Milan. For example, their iceberg drift model has been licensed to PAL who is using it to inform their clients of where icebergs are likely to drift — invaluable information for offshore operations. NRC, in cooperation with operators and other funding partners, led the development of a software program that models pressured ice. That software is being used today by Husky Energy‎ to forecast pack ice conditions.

“We have a project looking at an ice capable life boat and there is a lot of work in the area of using and looking at the safety of evacuation in ice,” said Millan

“The future of Canada is turning more and more and more to the north,” said Millan. “R&D by companies in the province in Arctic-related work and ice management was heavily driven by oil and gas operators. That funding has all but disappeared. Fortunately an operation like NRC can continue on its own dime,” he said.

“As far as the assignment of the intellectual property rights (IP) is concerned, if a company takes our research then we own the background IP. But we operate with the understanding that certain IP can be assigned to others.” However he readily admits that for IP with broad application, researchers at the NRC are not the people to bring it to market. It makes much more sense to partner with companies who have that expertise or to divest it.

Rutter’s Fraser Edison summed it up. “The oil companies have to continue to build their reserves and maintain their companies. And that means they have to be in the Arctic,” he said. “You can see that with Statoil and what is happening in Norway. They are going farther and farther north. We can expect the same thing throughout the region.”

Aided by funding agencies and world-leading expertise, Atlantic Canada’s R&D companies and their innovative technology will be there when the operators are ready once more to push north.

Feedback:
dchafe@atlanticbusinessmagazine.com
@AtlanticBus; @wkearley; @KrakenSonar; @PALairlines; @rutter_inc; @RDCNL; @NRC_CNRC; #IceCrackers

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