Arctic marine delivery systems provide an alternative to pipelines in transporting oil and gas from the Arctic, particularly for extensive geological plays identified offshore the Alaskan north slope, in the Canadian Beaufort Sea, and in the Canadian Arctic Islands. Arctic class ships must be able to operate year round in these areas and have a minimum capability of breaking eight feet of first-year level ice continuously. To achieve this, ships will have to be constructed to strength levels even greater than that required by Canadian regulations. As current propulsion system technology limits on board horsepower to first-year ice handling levels only, additional icebreaker support would be prudent.
The present level OI icebreaker technology cannot be comfortably extrapolated to Arctic class requirements and yield cost efficient ships. A private industry Arctic marine development program is working to demonstrate the feasibility of Arctic marine transport by 1982, and to build commercial Arctic ships for 1985 operation. The AML-X4, to be operational this year, is one in a series of research vessels to be tested in the program.
Tremendous oil and gas potential has been described for areas around the world north of the Arctic Circle. Geologists say that established North American on-shore potential in areas such as Prudhoe Bay, the Mackenzie Delta, and the Arctic Islands is merely a portent of bigger things yet to be found offshore. Figure 1 shows Arctic offshore areas in less than 1,000 feet of water, and summarizes the estimates of potential for oil and oil equivalent of gas (OEG) for these areas. Both the U.S. and the Canadian offshore areas could yield upwards of 100 billion barrels of oil and OEG. This potential is significant when compared to the estimate that North America will consume over 400 billion barrels of oil and OEG in the next 25 years, and current proven conventional reserves amount to only about one-third of this 25-year demand estimate.
Exploration activity in the Arctic offshore areas has been very encouraging. Major discoveries have been made in the Russian Arctic areas, particularly in the Kara Sea northwest of Siberia, where one field alone has a proven and probable reserve of over 210 TCF of natural gas. Results of ice reinforced drillship drilling in the Canadian Beaufort Sea to date continue to support the forecast large hydrocarbon potential for this region. Spurred on by high exploration success, and reacting to very high exploration costs, production planning is underway for a 1985 target startup.
Preliminary economic analyses of transportation schemes for Beaufort Sea offshore oil production suggest that a marine system is a viable alternative to pipelining. The analysis included forecast revenues based on world scale crude prices, and incorporated tentative ice-breaker .tanker designs represented by 1980's shipping tariffs ranging from $4.50 to $5.50 CDN per barrel. Producer returns allowed for royalty payments as defined by the Canadian Government's "Northern Fiscal Regime" where incremental royalties are levied against income beyond earnings for a base return on investment.
