Exxon: End the Atlantic gridlock

Executive: Failure to slash red-tape will cost billions; governments promise solutions are on horizon

Gary Park

Petroleum News Calgary Correspondent

ExxonMobil, whose founding companies have been among the pioneers and biggest risk-takers in Canada’s East Coast offshore, has a warning for regulators in the region — untangle the red tape or risk losing billions of dollars of investment.

Jim Massey, vice president of Canada and South America, said it’s time to end the debate over regulatory streamlining and take action.

“Atlantic Canada is at a disadvantage,” he told a Canadian offshore conference in Halifax October 7, noting that a 150-day well offshore Nova Scotia costs an average C$70 million, 40 percent more than the same well in the Gulf of Mexico.

Canada’s Natural Resources Minister John Efford told the conference he agreed that Canada’s offshore regulations should be modernized.

“Our system of regulation has served as well, but we need to take steps to improve if we are going to meet evolving needs, challenges and expectations of Canadians,” he said.

Nova Scotia Energy Minister Cecil Clarke said his government is “very close” to unveiling a new regulatory process that will shorten approval times and costs for new offshore projects.

“Investors are right when they reject regulatory duplication and inefficiency,” he said.

Clarke said he will seek cabinet approval for “one-stop shopping” for federal and provincial regulations, while Efford said he established a committee earlier in October to design regulations for the 21st Century.

‘Why doesn’t it happen?’

He said the only improvement was the federal government’s decision to remove a duty on imported drilling rigs, saving companies as much as C$20,000 a day on each well, but that was followed by new federal legislation requiring companies to conduct full environmental assessments on exploration wells.

Massey said that process could take two years to complete and duplicate what ExxonMobil has been doing in Atlantic Canada for 40 years.

His call to end the debate comes as the region, especially Nova Scotia, sinks to its lowest point, after several years of dry holes, surrendered exploration licenses and failed attempts by companies such as ExxonMobil to unload exploration licenses or find partners.

Massey underlined that bleak outlook when he said ExxonMobil, 50.89 percent operator of the Sable gas project, Nova Scotia’s only producing field, has no plans to drill exploration wells in 2005, after a discouraging summer of drilling.

“I have drilled a lot of wells within that Sable footprint,” he said. “In order to drill a well, you have got to have prospects.”

However, Massey offered some hope from ExxonMobil’s participation in Newfoundland’s Orphan basin. The company, along with sister company Imperial Oil and Chevron Canada Resources, made a combined work commitment last year of C$673 million for eight parcels.

“We put a lot of money on the table and we’re going to pursue that,” he said.

Massey also said that Sable, five years after coming on stream, is close to break-even on the C$2 billion investment, although the field’s reserves have been slashed to 1.37 trillion cubic feet from 3.5 tcf, reducing the projected operating life by 10 years to 2014, while output is down to 430 million cubic feet per day from a peak 550 million.