COMMENTARY
by David Thompson
Northern Cross (Yukon) Limited appreciates the opportunity to respond to the Nov. 25 commentary by Sebastian Jones of Yukon Conservation Society.
Northern Cross welcomes a dialogue with all interested parties regarding its projects, our doors are always open!
Northern Cross operates a number of oil and gas permits in North Yukon. These include three significant discovery licenses which contain conventional light oil and natural gas reserves.
Northern Cross has been active in the Yukon for more than 20 years, during which time it has been heavily involved in the implementation of protected areas and the North Yukon Land Use Plan. Its field activities to date, and proposed new activity, are entirely within Land Management Unit IX of the approved North Yukon Land Use Plan. The zone IV designation within Integrated Management Area allows oil and gas activity to occur. Northern Cross has made great efforts to minimize its footprint by relying heavily on land that has already been used for past exploration or Dempster Highway work.
Northern Cross has consistently engaged in First Nation and public consultation and participates fully in the regulatory process under the laws of the Yukon including YESAB process.
Northern Cross has already produced about 300 barrels of conventional light oil from the Chance significant discovery license. Most of that oil was used to fuel a diesel generator in Whitehorse as part of a successful test. The oil had properties similar to diesel, as it came out of the ground and was used without being refined. The engine ran at up to full output capacity on this Yukon produced Chance oil.
The Yukon currently spends about $250 million a year on liquid fuel, all of which is imported from outside the territory. Only about 10 per cent of that expenditure flows back to Yukon businesses. An increasing majority of this fuel is derived from unconventional sources in southern Canada and the U.S.
These outside sources of fuel do not create Yukon jobs or benefits, nor do they pay royalties or Yukon taxes on their production. Producers of fuels brought in from outside the territory do not participate in the upstream Yukon regulatory process nor do they seek the views of Yukoners on that subject. These fuels are transported thousands of kilometres using various combinations of rail, road, pipeline and barge transport. This can be a very long and costly supply line, which contributes to increased emissions and possibility of a spill.
While we appreciate Mr. Jones’ concern for our economics, his numbers do reflect a basic local value proposition. World oil prices are about $60/barrel, but petroleum products in Yukon are more like $1/litre, or $160/barrel. Would it not make sense to try to capture not only a greater portion of the $100/barrel value add, but perhaps the entire upstream value for the local economy? This is a significant opportunity to take a resource from reservoir to end use entirely in the Yukon. A similar opportunity exists for natural gas resources. This represents a very significant opportunity for both First Nation and other Yukon businesses.
Our geological and geophysical studies based on existing discoveries, and new data acquired by Northern Cross by drilling and its 3D seismic program, indicate there may be sufficient conventional light oil resources to offset Yukon demand for many years to come. More work is required to further define these hydrocarbon resources.
Some of this work is the basis of the current Northern Cross application, which has been under review by YESAB for the past 18 months. During this time Northern Cross has been forced to substantially shut down its Yukon operations, reduce staff and idle the use of the services provided by more than 80 Yukon businesses used by Northern Cross in the past. The company currently has no idea when or if it will be able to continue its field work. These delays are costly to the company and to the Yukon economy.
We all have common goals of reducing the use of fossil fuels and making the most efficient use of the petroleum products we do use. One day we may not need to use fossil fuels, but for now Yukoners are necessarily large users of fossil fuel. Our premise is that the use of domestic fossil fuel resources, produced under the laws of the Yukon and benefitting the local economy, is preferable to using unconventional resources brought from great distances. This concept of self-sufficiency, increased local capture of the value chain and reduced transportation is supported by many of the political parties in Canada.
Not only is this good for the Yukon economy, but it is good for the environment by reducing the emissions created by thousands of kilometres of transportation.
David Thompson is the chief executive officer of Northern Cross (Yukon) Limited.