An environmental group urged Canada Friday to suspend oil exploration in the Arctic, warning that otherwise it risks an environmental disaster worse than the BP spill in the Gulf of Mexico.

The PEW environmental group said in a report that it does not necessarily oppose developing the oil and gas reserves at the top of the world, but called on Canada to become "Arctic ready" and urged reforms of the way it regulates the industry.

Canada has already granted exploration permits to British Petroleum (BP), ConocoPhilips and Imperial in the Beaufort sea, on the border of the northern Yukon and Alaska.

But after BP's Deepwater Horizon disaster in the Gulf of Mexico last year, Canada's energy office began reviewing security and environmental requirements for offshore drilling in the Arctic.

As such, PEW argued, Canada should suspend drilling licenses already granted and stop the process until the risks of a disaster can be reduced.

"The Deepwater Horizon disaster has highlighted the risks of offshore oil drilling in general. Exploratory drilling in the Arctic Ocean poses even greater risks, and the consequences of a major spill are potentially much more severe," the PEW report said.

"Canada should seize this opportunity to enact significant reforms to the licensing and regulatory sides of its Arctic offshore hydrocarbon program," it said.

The report said existing technologies for recovering oil in the event of spills have never been proven in the Arctic.

Mechanical methods for recovering spilled oil were designed for use in open waters -- not the Arctic's icy waters -- and dense fog, high seas and freezing temperatures may foreclose using boats in such operations, it said.

Likewise, it said there was little data to show that burning spilled oil, another method of dealing with oil spills, would work in Arctic conditions.

The report said more research needed to be done to determine whether chemical dispersants would offer "a pragmatic response option for Arctic waters."

The study also said the Canadian Coast Guard has yet to establish whether it has the capabilities to intervene in the event of an Arctic spill, and it stressed the need to regulate the maritime transport of oil from the Beaufort Sea to Alaska or the Northwest Passage.

Other Arctic nations -- the United States, Russia, Denmark, Greenland -- and the major oil companies also covet the Arctic's oil, now that global warming has made it more accessible.

According to the US Geological Survey, the region contains a fifth of the world's undiscovered oil reserves.

"Canada has the opportunity to lead the way to environmentally safe oil and gas development in the Arctic Ocean," the PEW report said.

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