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Facing down offshore challenges Chevron starts drilling deepest well ever in Eastern Canada’s Orphan Basin confident it has measures in place to handle a blowout; Newfoundland government said the oil industry is too critical to region’s economy to suspend offshore exploration Gary Park For Petroleum News
Drilling started May 9 on the deepest well ever planned for Canadian waters – a venture Imperial Oil chief executive officer Bruce March described as “high-risk,” an economic gamble that has been compounded by a public clamor for tighter rules or outright bans on offshore drilling.
In 8,500 feet of water, the Lona O-55 well is the second wildcat in the Orphan Basin by a partnership of Chevron Canada (50 percent,) Royal Dutch Shell (20 percent) and sister companies Imperial and ExxonMobil Canada at 15 percent each. It is about 250 miles northeast of St. John’s Newfoundland on acreage picked up in 2003 for C$673 million.
The first well, Great Barasway F-66 — drilled in 2006 in water depths of 7,670 feet — encountered rig problems and was abandoned with no tests run in spring 2009 at a total depth of 22,150 feet, about 2,300 feet short of its projected depth. The final bills were never disclosed, but were estimated by analysts to be about C$200 million, C$60 million more than the original projection.
Great Barasway attracted little or no interest outside of industry circles. Lona, in the wake of the Deepwater Horizon blowout in the Gulf of Mexico, sits squarely in the public spotlight.
Chevron’s Web site contains promises to take extra precautions because of the Gulf of Mexico events, although the company said it doesn’t need to make any changes to its program because of the Gulf disaster.
Extra due diligence Mark Macleod, Atlantic Canada manager for Chevron, told the St. John’s Telegram that although the cause of the Gulf spill has yet to be determined, the Lona partners have “redoubled our efforts, with extra due diligence, focusing on, in particular, the blowout preventer.”
He said a third-party consultant has been hired to review the maintenance and reliability of the blowout preventer system on the drillship Stena Carron.
“We’re confident we can drill this well safely,” MacLeod said.
The Stena Carron has three ways to activate its blowout preventer: An acoustic signal sent to the seabed; sending an underwater robot to the seabed; and an automatic hydraulic system to shut down a well.
If an accident did occur, he said Chevron could have deepwater drillships now in the Gulf of Mexico on the scene within about 11 days.
Fail-safe shutdown an option A spokesman for the Canada-Newfoundland and Labrador Offshore Petroleum Board, which regulates the region, said that in addition to the blowout preventer, a fail-safe shutdown is an option.
He said there have been no discussions about suspending the Lona well because of the Gulf blowout, explosion and resulting oil spill.
The spokesman said that when Chevron applied for a license to drill, the company was required to demonstrate how it would drill a relief well.
However, Ian Doig, a veteran offshore analyst, said the only two other rigs in the Atlantic Canada area do not have the capacity to drill an emergency relief well at such water depths.
“If Chevron gets into problems … they’ll just have to stand back and watch,” he said.
Newfoundland Premier Danny Williams tried to ease concerns by telling the provincial legislature he favors an independent analysis of whether the province is prepared for a major spill.
However, he suggested the colder water and thicker crude in the Orphan Basin would see any oil sink to the seabed rather than washing toward the coast.
Offshore rules relaxed in 2009 Newfoundland Natural Resources Minister Kathy Dunderdale defended the Orphan Basin exploration program as too critical for the region’s economic development to call off the program.
“We’re satisfied at this point in time that it is safe and prudent to continue with drilling in the Orphan Basin,” she said, noting the government has reviewed all safety plans.
Political opposition to offshore activity flared on May 10 when it was revealed that Canadian regulators relaxed offshore drilling regulations last year, giving the industry more flexibility when putting in place safeguards against oil spills.
The old rules included direction on how companies should cement the casing on a well and how they should conduct pressure tests. Under the new rules, adopted by the National Energy Board, or NEB, operators must set environmental protection rules and list what equipment they would use to meet those goals.
The NEB said the changes are a “modern” approach that allows companies to use different environmental protection technologies, depending on the nature of the project.
Craig Stewart, director of the World Wildlife Fund Canada’s Arctic program, said the federal government has “shifted away from a prescriptive regulatory framework to one that encourages industry to meet soft regulatory outcomes. The shift is a leap of faith that industry will put the public interest in front of self-interest and shareholder profits. It didn’t work in the financial services industry.”
Transport Minister John Baird said Canadian regulators “will not allow anything to proceed unless they are convinced that the environment will be protected.”
Editor’s note: This story is a May 11 reprint from Greening of Oil at www.greeningofoil.com
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