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Newfoundland emerging from the gloom Province’s offshore attracts region’s highest single work commitment from trio of operators, following ‘breakthrough’ Statoil finds Gary Park For Petroleum News
Boosters of offshore oil prospects in Eastern Canada have always been eager to draw parallels with the Gulf of Mexico, not least the untapped potential of their region.
They thrive on pointing out that Canada’s Atlantic waters have seen only 563 wells drilled in the past 33 years, a tiny fraction of the thousands in the Gulf.
But, in recent years, they have struggled to keep the comparisons valid as the tallies of dry holes, abandoned exploration licenses and production stumbles in the offshore Newfoundland and Nova Scotia plays have overpowered any other statistics.
In the last four years there has also been an unsettling decline in production from the only three producing projects - Hibernia, Terra Nova and White Rose - to about 230,000 barrels per day from 275,000 bpd.
The talk has increasingly turned to the prospects of more major global companies packing their bags and heading for less daunting and costly plays.
High bid But that mood experienced a sudden reversal in December when the government regulator for offshore Newfoundland posted the highest single bid on record for its exploration rights.
A consortium of ExxonMobil Canada (with a working interest of 40 percent), Suncor Energy and ConocoPhillips (with 30 percent each) made a successful bid of C$559 million for 657,000 acres in the Flemish Pass about 300 miles northeast of St. John’s.
ExxonMobil was also involved in two other top bids, partnering with Suncor in a C$21 million work commitment for 714,000 acres in the nearby Carson Basin, while securing solo rights for C$16.7 million to 270,000 acres in the Jeanne d’Arc region.
There were no bids for three other parcels.
ExxonMobil operating Hibernia ExxonMobil and Suncor are veteran players in Atlantic Canada, with ExxonMobil operating the fixed platform at Hibernia, the region’s pioneering oil production project, and developing the C$6.4 billion Hebron project, which is targeting its first oil by the end of 2017.
Both projects have Suncor as a partner. Suncor also operates the Terra Nova floating production, storage and offloading system in a joint venture that includes ExxonMobil.
ConocoPhillips is a fresh face in the region, linking up in mid-2014 in the Shelburne exploration licenses offshore Nova Scotia, where drilling is scheduled to begin in late 2015, operated by Shell Canada with a 50 percent stake. ConocoPhillips has 30 percent and Suncor the remaining 20 percent.
Statoil discoveries The Flemish Pass parcel is part of the region where Norway’s Statoil made a headline-grabbing strike estimated at 600 million barrels of 34 degree API recoverable oil at Bay du Nord in 2013, having earlier found oil at its Harpoon license where the players have yet to offer an estimate of recoverable oil and the nearby Mizzen Field, which officials say holds 100 million-200 million barrels.
Orjan Birkeland, Statoil’s vice president of exploration in Canada, rates the series of finds as a “breakthrough” after several years of exploration.
“The important thing here is that the area has a lot of growing room,” he told a November conference in St. John’s.
“There are several prospects that have been defined within this area,” Birkeland said, adding that Flemish Pass prospects are being targeted in a current 18 month drilling program that is expected to last until mid-2016.
He said that so far one well and one sidetrack have been drilled into Bay du Nord, “so there are a lot of hurdles we need to clear before we mature it further.”
Birkeland said Statoil is still examining approaches to the logistical challenges posed by the Flemish Pass, including ice management and the distance from land.
Statoil has listed Newfoundland as a “core priority for our global exploration.”
On brink of new era Robert Cadigan, president and chief executive officer of the Newfoundland and Labrador Oil & Gas Industries Association, said the Flemish pass bid was evidence of a growing interest in Newfoundland’s offshore, which he believes is on the brink of a new era and is roughly in the same position as Norway four decades ago.
Turning belief into reality is a matter of great concern to the Newfoundland government which is faced with predictions that offshore production is headed for steady decline from 280,000 barrels per day currently to about 90,000 bpd in 2030, unless there is a dramatic change of fortunes.
The province is more on edge than Canada’s other petroleum producing regions, having based its 2014-15 budget on average Brent prices of US$105 a barrel.
Cadigan and industry officials are encouraged by changes announced a year ago by the Canada-Newfoundland Labrador Offshore Petroleum Board to introduce a new land tenure system that gives license-holders two years in known areas and four years in unexplored prospects - compared with only one year previously - to review the data and make more informed decisions.
Worldwide interest “That’s actually huge,” said Rod Starr, senior vice president western hemisphere with TGS-NOPEC Geophysical Co.
He said that now the regulator has scheduled calls for bids for the next seven to 10 years there is “worldwide interest” in the region, including by companies that have never been active in licensing seismic data offshore Labrador.
TGS has linked up with Petroleum Geo-Services and the Newfoundland government’s Nalcor Energy over the past three years to map out 18,150 square miles of seismic data and is about to start work on another 11,580 square miles to provide information for companies to assess the crude oil and natural gas potential.
Jim Keating, Nalcor’s vice president of oil and gas, said more 2-D seismic was gathered in 2014 than in any single year since 1983.
Cadigan said the regulatory changes are a “game-changer (in areas that would cause) geologists to salivate. They are so large. In terms of data, they are similar to discoveries made in West Africa.”
In addition to charting work by TGS and PGS, Shell has completed 3-D seismic imaging off Nova Scotia as part of its C$970 million work commitment in that deepwater area.
BP holds exploration licenses in four blocks covering 5,400 square miles in water depths ranging from 330 feet to 9,800 feet.
Barry Munro, oil and gas leader with Ernst & Young, said Atlantic Canada has little cause to panic over last year’s decision by the United States to consider allowing seismic work in its Atlantic offshore, noting that the U.S. offshore is seen as more gas than oil prone, while the Canadian offshore is well advanced with infrastructure and companies are clear about the regulatory system for drilling exploratory wells and producing from them.
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