Drilling a new well to supply natural gas for the energy-hungry town of Inuvik, N.W.T., may be too financially risky, say companies, noting that the existing Ikhil well was not viewed as worth the cost.
The Ikhil Joint Ventures well cost $50 million to build, but it reserves are already running low, though it's only about halfway into a 20-year contract.
That concerns companies about the prospect of making a similar investment for another well, said Patricia Newson, who speaks for Alta Gas Ltd., one of three partners in Inuvik Gas.
"You might expect from the size of the market in Inuvik you would usually have far lower risks for the capital that you're investing," she said. "So it's not so much that the risks are unacceptable, it's just a trade-off between the risks and the rewards."
The Inuvik Gas company is now looking to replace the Ikhil gas well, which was completed in the late 1990s. It is currently the only well supplying natural gas for Inuvik, allowing residents to heat their homes and offices, as well as cook and bathe.
A proposed well project at Parsons Lake would cost another $50 million to build, but Ikhil has already been regarded as an expensive failure, Newson said. Companies probably don't want to risk losing out again.
"We did learn that even if you think you're in the exploration and production business, things happen in the North because of the remote location and the severe weather, and it adds to the risk," Newson said. "It makes it more expensive, and we certainly found that was the case in the first drill."
The cost of the original well has not been recouped, and Ikhil is projected to run dry in less than two years.
The mayor of Inuvik, Denny Rodgers, said it's up to the owners of the well to find a stable supply. He suggested building a 25-kilometre pipeline to connect Inuvik to the large gas field at Parsons Lake.
Nearly 90 per cent of homes in the Arctic town are on natural gas, Rodgers said.