CALGARY, Alberta, April 21 (Reuters) - Canada's Northwest Territories will be able to borrow an extra C$500 million to fund new infrastructure projects and potentially tap stranded oil and gas reserves after the federal government upped its borrowing cap in the budget on Tuesday.
The new borrowing limit of C$1.3 billion is less than the C$1.8 billion requested by the NWT but still a huge boost to the vast but sparsely populated territory, home to nearly 25 percent of Canada's natural gas reserves.
The NWT mainland, Arctic islands and Beaufort Sea hold 16.4 trillion cubic feet gas, as well as 1.2 billion barrels of crude oil, according to the National Energy Board.
But the majority of resources are not accessible by road, rail or pipeline, making oil and gas development prohibitively expensive.
The NWT now plans to improve infrastructure in a region twice the size of France and a population of just 43,600.
"We are pleased. We have not made any specific decisions yet but our priority is to invest in infrastructure that will support economic growth in the NWT," said Shaun Dean, director of Cabinet communications for the territorial government.
"That includes facilitating greater access to all the territory's resources and supporting responsible development."
Better infrastructure will also cut the cost of living in remote communities, which pay hefty prices for food and fuel to be flown in.
The NWT government, which last year gained control of its oil and gas revenues through a devolution agreement, is forging ahead with new infrastructure despite oil prices dropping from more than $100 a barrel to around $55.
NWT Minister of Industry, Tourism and Investment David Ramsay last month said NWT, which he touts as a future "energy giant", had seen exploration dollars and activity come to a standstill after the price slump.
Last December Chevron Corp shelved plans to drill for oil in the Beaufort Sea in Canada's Arctic.
Infrastructure projects currently underway include an all-season road between Inuivik and Tutoyaktuk on the Arctic coast.
The NWT is also planning an all-season road from Wrigley in the south to Norman Wells in the Sahtu region, where the Canol Shale could hold up to a billion barrels of potential oil reserves, according to some industry estimates.
Development of the Canol Shale, like the Mackenzie Valley Gas pipeline carrying natural gas from the Arctic to Alberta, stalled even before prices started to slide, partly because of tricky and expensive access.
Husky Energy deferred its exploration program in 2014, although a spokesman said it remains part of their long-term growth portfolio. ConocoPhillips recently said it does not plan to do any more exploration work in the region.
Editing by Diane Craft