Canada's federal government has returned security deposits that oil majors had paid to drill in Canadian Arctic waters which are currently off limits until 2021, but even if Canada lifts the ban then, companies are unlikely to be eager to drill in harsh-environment challenging waters, analysts say.
Canada has returned to oil companies-including majors ExxonMobil, Chevron, BP, and Imperial Oil-a total of US$327 million (C$430 million) worth of security deposits, or 25 percent of the money they had pledged to spend on exploration in the Beaufort Sea, CBC reports.
The Canadian government motivated its decision to return the deposits with the existing ban on drilling in the Arctic offshore which prevents oil firms from drilling.
In December 2016, Canada's Prime Minister Justin Trudeau announced that Canadian Arctic waters are indefinitely off limits to new offshore oil and gas licensing, and this ban would be reconsidered every five years through a science-based review.
In July 2019, the government issued an order in council extending the moratorium until December 31, 2021.
Earlier this year, the Canadian Association of Petroleum Producers (CAPP) said that Canada was lagging behind other oil producers in tapping its offshore oil and gas resources because of the moratorium on drilling in its Arctic waters in place since 2016 and up for review in 2021.
Commenting on the government returning the security deposits, Merven Gruben, mayor of the Tuktoyaktuk hamlet on the Beaufort Sea, expressed to CBC disappointment and concern that the hamlet will not have a chance to benefit from oil exploration.
"Oil and gas future up here is very, very bleak," Mr Gruben told CBC.
Oil companies may not return to the Beaufort Sea if Canada lifts the moratorium after 2021, because of the challenging and expensive drilling in Arctic waters, while there is plenty of oil elsewhere in the world, oil and gas analyst Doug Matthews told CBC.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More