Nova Scotia’s troubled offshore might be about to turn a corner, with the wealthy Bass family of Texas intent on reviving oil exploration, ConocoPhillips reviving an old offshore license and a crucial decision expected this year on a natural gas project.
The Canadian Environmental Assessment Agency has given conditional approval for Bass Enterprises Production Co. (BEPCo) to spud a wildcat in 2006, pending a pre-drilling survey that might require the well to be relocated or other protective measures.
BEPCo also needs a green light from the Canada-Nova Scotia Offshore Petroleum Board for a program that might see three wells drilled this decade.
BEPCo is the oil and gas unit of the Bass family’s privately-held industrial conglomerate that has turned patriarch Perry, 90, and his four sons into billionaires.
Like the Gulf of Mexico 50 years ago
Lee Muncy, exploration vice-president for BEPCo, told a conference in Halifax last month that the under-explored basin has “tremendous potential … comparable to what the Gulf of Mexico may have looked like 50 years ago.”
He said BEPCo’s 561,000-acre exploration license, acquired in 2002 for a C$6.7 million work commitment, gives the company “exposure to world-class reserves.”
BEPCo has identified three prospects from 3-D seismic data pointing to possible combined reserves of 2.3 billion barrels of oil and 1.6 trillion cubic feet of gas.
The initial Mon Cherie well, 120 miles south of Halifax, is located in 4,800 feet of water and expected to reach a total depth of 10,700 feet.
It is budgeted at US$40 million, including US$8 million to bring a rig from the Gulf of Mexico.
However, Muncy said BEPCo is hopeful it can reduce its costs by using a local rig or sharing a rig with another company operating in the area.
For now, the company is still trying to decide whether to opt for a jack-up rig, semi-submersible or drillship.
In targeting oil, BEPCO is breaking ranks with its Nova Scotia peers who have unsuccessfully drilled for natural gas in recent years.
The offshore made its commercial debut in the 1990s with the Cohasset-Panuke field, which pumped 45 million barrels over seven years and ended up a money loser for PanCanadian Energy, a co-founder with Alberta Energy Co. of EnCana.
ConocoPhillips: maybe seismic this summer
The second cause for optimism is word from ConocoPhillips that it is in the final stages of converting an old license into a new permit to start exploration on the Nova Scotia side of the Laurentian sub-basin.
Kent Lissack, director of business development with ConocoPhillips Canada, said no drilling plans have been finalized, but a seismic program could be started this summer, followed by one or two exploratory wells in 2007.
However, he said it would take eight to10 years from a commercial discovery before development would occur.
The area was under a 30-year moratorium until 2002 when an offshore boundary dispute between Newfoundland and Nova Scotia was settled.
On the Newfoundland side, a partnership of ConocoPhillips and Murphy Oil converted seven exploration licenses. The two companies have spent C$23 million and are committed to an additional C$18 million.
The entire basin covering 15,500 square miles has an estimated resource potential of 9 trillion cubic feet of gas and 700 million barrels of oil, the bulk of it in Newfoundland waters.
Decision on Deep Panuke
Meanwhile, EnCana said it hopes to decide this year what to do with its Deep Panuke gas project, which was put on hold two and a half years ago.
EnCana decided it needed more than 950 billion cubic feet of reserves and greater regulatory co-operation to make development economic.
The prospects of shoring up the reserves were dealt a setback when Marauder Resources East Coast scrapped plans to participate in an exploration well with EnCana this year.
EnCana chief executive officer Gwyn Morgan told reporters June 16 his company is still uncertain whether it will drill a well on its own or with another partner this year.
He said that decision hinges on the outcome of talks with partners in the nearby Sable Offshore Energy Project about sharing Sable infrastructure to lower the risks for Deep Panuke.
Those discussions have given rise recently to speculation that Shell Canada, which owns 31.3 percent of Sable production, might buy Deep Panuke, although negotiations have not reached that point.
Deep Panuke’s reserves would enable Shell to reverse the downward slide in its Sable production from 158 million cubic feet in 2002 to 125 million last year.
Whatever the outcome, Morgan said EnCana hopes to end the doubts over Deep Panuke this year.
Cape Breton’s east coast assessment
Quiet progress is also being made on another front, with the Canada-Nova Scotia Offshore Petroleum Board within weeks of releasing a “strategic environmental assessment” of the potential for oil and gas exploration of a region off Cape Breton’s east coast.
The regulator and its consultants have been studying the possible impact of exploration on the Misaine Bank, the home to whales and a lucrative crab and shrimp fishery accounting for 15 percent of Canada’s total catch.
Scientists, environmentalists, fishermen and the tourism industry have mounted a concerted campaign against seismic testing, fearing potential harm to sensitive marine life.
Robert Rangeley, marine program director with the World Wildlife Fund, told the board “such areas are critical to biodiversity conservation, ecosystem function and sustainable fisheries and should not be compromised by oil and gas activities.” He said the area should be declared a “no-go” zone.
The offshore board has said that comparisons to similar geological structures around the world suggest oil and gas reserves might be found in the area, although current seismic data is based on very limited quality and quantity.
