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Newfoundland: Dealing with a tragedy Province reels from loss of 17 in helicopter ditching; pushes ahead with exploration; weighs initial gas project royalty holiday Gary Park For Petroleum News
It might have been a time of quiet celebration and a mood of hope for the future of Newfoundland’s offshore oil and gas industry.
Instead, it was the worst of all times, with the deaths of 17 rig workers and flight crew in the March 12 ditching of a helicopter in the North Atlantic, leaving only one survivor in critical, but stable condition.
The province’s worst offshore oil disaster occurred 27 years ago when the Ocean Ranger, then the world’s largest semisubmersible rig, capsized and sank on the Grand Banks with the loss of all 84 who were aboard.
Bringing Newfoundland into commercial oil production has always been an odds-defying struggle with rising costs, spotty exploration results, the departure of major exploration companies, squabbling over royalties and the unrelenting challenge of operating in stormy, iceberg-infested waters.
But a handful of producers has plugged on and just recently observed a milestone, when combined output from the Hibernia, Terra Nova and White Rose fields passed 1 billion barrels.
For a province that has carried Canada’s heaviest burden of unemployment during its 60 years as a member of the Canadian confederation, the offshore has at least partly offset the loss of a fishery and the decline of a mining industry.
The industry has provided thousands of construction and rig jobs and generated more than C$5 billion in royalties since 1997.
Price has been high Yet the price has been high, as Premier Danny Williams said in describing the “terrible tragedy off our shores.”
He said Newfoundlanders have for centuries risked their lives “to provide for their families and contribute to this province. And yet, we will never, ever be able to accept the loss of precious lives to the sea.”
The March 12 crash involved a Sikorsky S-92 helicopter from a fleet of three operated by Cougar Helicopters, which ferries workers to and from the offshore rigs.
Just minutes into a 240-mile flight the pilot reported that he was experiencing a “main gear box oil pressure problem” and was returning to shore. That was quickly followed by a Mayday call.
While the fuselage was being recovered from about 400 feet of water, a team of 20 investigators — 12 from Canada’s Transportation Safety Board and eight from the United States — was probing the cause of the crash.
Cougar Helicopters aircraft have had no accidents and no fatalities in nearly 50,000 flight hours over 10 years of serving the offshore, but a Transport Canada database says the company’s S-92 helicopters have been involved in 10 “occurrence” reports on or near Newfoundland’s coast in the past year.
Building blocks assembled As it comes to terms with the tragedy, Newfoundland is also assembling the building blocks for a robust offshore.
The White Rose partnership, operated by Husky Energy, is currently producing at about 77,000 barrels per day and is working on a major expansion to tie in three satellite fields at an estimated cost of C$2.5 billion, but has yet to establish a timetable. Husky has earmarked C$800 million for its East Coast activities, without disclosing a breakdown, although it said an exploration well is possible.
On the Grand Banks, the semisubmersible Henry Goodrich is drilling an exploration well on a Flemish Pass license held by StatoilHydro Canada, while StatoilHydro’s partner Petro-Canada has scheduled an exploration well this year as part of an East Coast budget of C$335 million.
It is not clear whether Chevron Canada will proceed with an exploration well proposed for Orphan basin, two years after completing its Great Barasway F-66 well at a cost in excess of C$200 million.
Drilling is being partly held up while Chevron looks to farm out a portion of its 50 percent working interest in two Orphan licenses.
ConocoPhillips Canada has plans for a possible US$100 million well in the Laurentian subbasin, which was initially targeted for late 2009, but timing remains uncertain pending a rig contract.
ExxonMobil Canada has on-going work at Hibernia, without disclosing how many, if any wells are planned for this year.
Royalty holiday possible The two most significant developments in March have included indications from the Newfoundland government that it is open to a royalty holiday to kick-start its first offshore natural gas project and word from ExxonMobil that it has launched an environmental assessment of its delayed Hebron-Ben Nevis oil project.
In the 1970s and early 1980s, exploration companies chasing oil offshore Labrador struck several large, promising gas deposits — finds that were shelved because of low gas prices and inadequate technology.
Believing that both problems can be overcome, industry made a comeback in the Labrador region, with companies such as Husky, Chevron and Suncor Energy acquiring four parcels covering 2.3 million acres last year for total work bids of C$186.4 million.
Interest in gas development has been boosted by word from Newfoundland Natural Resources Minister Kathy Dunderdale that the government is “more than prepared” to consider a royalty holiday to get a pioneer gas project under way.
She said a “number of companies” have shown interest in bringing Newfoundland gas into production, adding that risk-sharing between government and industry will prevail under a new royalty regime.
On March 13, lead partner ExxonMobil registered the Hebron project with the Canada-Newfoundland and Labrador Offshore Petroleum Board, setting in motion the regulatory process for exploiting 566 million barrels of heavy oil.
The preliminary schedule indicates the first oil is expected sometime between the second half of 2016 and late 2017. The productive life is estimated at 30 years, although future developments could extend that target.
ExxonMobil said that more than 70 wells could be drilled at Hebron’s three fields, with 35-45 expected for the “base development.”
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