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Newfoundland government, Statoil to spend $3.9 million on Arctic oil research

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ST. JOHN'S, N.L. - Statoil Canada and the province of Newfoundland and Labrador will spend $3.9 million to help advance contentious oil and gas development in harsh environments, including the Arctic.

Statoil said Tuesday it will spend $2.4 million on three new research projects while Crown corporation Research and Development Corp. will spend $1.5 million.

One initiative led by Kvaerner Canada Ltd., specializing in offshore engineering and construction, involves Arctic subsea oil and gas separation technology.

St. John's-based Rutter Inc., developers of advanced radar systems, will research ways to automatically detect and predict ice movement.

And AMEC Americas Ltd., engineering and project management consultants, will help Statoil develop an ice surveillance system including remote sensing capability.

"There is high potential for us to deliver results that support offshore developments both (for) offshore Newfoundland, in other sub-Arctic regions and into the Arctic one day," said Atle Aadland, Statoil Canada's vice-president for offshore Newfoundland.

"As for all our operations, safety comes first," he said in an interview. "What we want to do with this project is to really understand the challenges before we make the next steps."

The announcement is another step as the province tries to position itself as a centre for Arctic and harsh environment expertise.

Newfoundland and Labrador relies on its offshore oil sector for about one-third of provincial revenues. It has also invested heavily in seismic surveys to spur more exploration and international investment.

Crown corporation Nalcor Energy, which has spent $12 million of its oil earnings on geoscience programs since 2009, announced last month it will expand that work along the island's south coast. Nalcor has also said it will spend another $11.8 million on similar projects this fiscal year.

Statoil is considered an Arctic exploration pioneer although actual drilling is likely still years off.

The Norwegian energy firm announced in February that it will begin exploration drilling off Newfoundland this summer in the Flemish Pass Basin.

It will involve the Bay du Nord prospect, a reservoir of light crude believed to hold between 300 and 600 million barrels of recoverable oil. Located about 500 kilometres northeast of St. John's, the subsea oilfield is farther offshore and in 1,100 metres of water compared to other sites like Hibernia, Terra Nova and White Rose that are about 100 metres down.

Environmental activists and aboriginal groups have raised alarms about deep-water drilling and even the prospect of Arctic oil development. They say the BP Gulf of Mexico disaster in 2010 exposed the technological limits of controlling blowouts — even in comparatively mild conditions.

Farrah Khan, Arctic campaigner for Greenpeace Canada, says it's especially galling that Newfoundland and Labrador is using public money to advance a "very risky" industry.

"We think that our governments should instead be investing in sustainable development opportunities, especially for the inhabitants of our North and indigenous communities."

Khan said the Arctic has been estimated to hold relatively small amounts of recoverable oil when compared to costs and potential risks.

"The Arctic should be completely off-limits for offshore oil drilling," she said in an interview. "We need to start thinking about moving away from fossil fuels now if we're serious about tackling climate change."

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