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The Rock turns into a brick Newfoundland recovers from setbacks; Spain’s Repsol latest entry; Husky, Statoil drill early well; full steam ahead for Hebron Gary Park For Petroleum News
Occupying a lonely spot in the storm-battered North Atlantic, Newfoundland often feels left out of the loop.
Right now that might be a blessing. If there’s a worldwide recession brewing, someone may have forgotten to tell the hardy souls on The Rock, as the island is known in the rest of Canada.
For much of the past decade, the Newfoundland offshore has experienced a litany of woes — dry holes, abandoned exploration rights, a pullout by many global majors, a series of mechanical shutdowns at its three producing oil fields, and feuding between the government of Premier Danny Williams and partners in the Hebron oil project.
Suddenly, the sun has decided to shine on an often bleak petroleum frontier.
Sales of exploration rights have staged a comeback, Spain’s giant Repsol has decided to enter the region, drilling is under way and progress is being made towards unlocking Newfoundland’s stranded natural gas.
Successful sale In the latest auction by the Canada-Newfoundland and Labrador Offshore Petroleum Board, all five parcels on offer attracted qualifying bids from an impressive array of companies — Husky Energy, Petro-Canada, StatoilHydro and Repsol.
They made a combined C$130 million in work commitments to secure the rights, boosting the year’s sale total to C$316 million (the second best result in the past two decades) and there’s one more sale before 2008 ends.
Natural Resources Minister Kathy Dunderdale is enthused about what is taking place.
She told Petroleum News she has been aware for some time of Repsol’s growing interest in Newfoundland and “delighted that they obviously liked what they found (by) coming to the table in a fairly significant way.”
Dunderdale is especially pleased that Repsol will bring its extensive deepwater experience to one of the most challenging hydrocarbon environments.
Although Repsol is giving no indications whether it is targeting oil or natural gas prospects, its arrival heightens interest in the chances of eventually opening up Newfoundland’s considerable gas potential, which includes about 10 trillion cubic feet of discoveries and another 60-70 tcf of estimated resources.
Repsol is 75 percent partner with Irving Oil holding the balance in the Canaport LNG terminal and regasification facility at Saint John, New Brunswick, which is due to come on stream later this year, with 1 billion cubic feet per day of send-out capacity.
Government’s goal landed gas Although most observers doubt commercial production is possible before 2015, pending industry decisions on the preferred technology for getting offshore gas to market, Dunderdale said a draft gas royalty regime released a year ago is open for “tweaking” to get a pioneering project under way.
However, she said the government has been “very clear” that its first priority is to land any gas in Newfoundland.
Any company that decides not to do that has to be able to demonstrate to us in very clear terms, technically and economically, why that is not possible,” she said.
But Dunderdale would not be drawn into a guessing game on when Newfoundland gas might come onstream.
Repsol has taken minority stakes in three parcels, all with Husky Energy as the lead partner, and Husky has been more bullish than any company about the chances of tapping offshore gas.
Husky is involved in four of the five parcels awarded in the latest sale, StatoilHydro in two and Petro-Canada in two. Statoil, with a 65 percent stake, and Husky expect to start exploratory drilling before the end of 2008 on one parcel, carrying a work commitment of C$18.7 million, taking advantage of Transocean’s drillship Henry Goodrich, which is in the offshore for the next two years under contract to those two companies, plus Petro-Canada. The largest bid was C$81.9 million by a 50-50 partnership of Petro-Canada and StatoilHydro.
Husky spokesman Graham White told Petroleum News that his company, which has stakes in all three producing offshore oil fields, acquired its four parcels because of their “proximity to our existing holdings and our commitment to the long-term” future of Newfoundland.
One of the most significant changes in the offshore over recent years has been an end to companies pulling out of the basin after the period in 1994-2002 when C$125 million in security deposits was forfeited.
Bitter feelings fading Also fading fast are the bitter feelings between ExxonMobil and the Newfoundland government that brought work on the Hebron-Ben Nevis oil project to a halt.
Jim Flood, Arctic project executive for ExxonMobil, said earlier in November that a development application should be filed within a year and the first oil is anticipated in 2017, peaking at 150,000 bpd.
Despite the slide in oil prices, he said ExxonMobil and its partners are taking a long-term approach to investment. He said there is no indication at this time that the viability of Hebron will be impacted.
On a much smaller scale, Alberta-based Leprechaun Resources is hoping to sell shares in the next few months to raise money for drilling on Newfoundland’s onshore west coast.
The company’s rights have been independently assessed at 280 million barrels in formations similar to those in 16 North American basins that are producing oil.
The startup hopes to sell about 20 million shares at 55 cents each, then hopes its three wells scheduled for summer 2009 are successful in striking oil or gas in complex geological formations.
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