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Nova Scotia sweetens offshore exploration and production rules Government says it will no longer require flow tests for exploration wells, EnCana’s Deep Panuke will get ‘new consideration’ Gary Park Petroleum News Canadian Contributing Writer
Nova Scotia’s offshore players have been rewarded for their patience and persistence.
After years of lobbying to get a more forgiving regulatory regime they achieved a breakthrough on Oct. 5 when the Canadian and Nova Scotia governments announced measures they hope will generate fresh exploration in a slumping region.
Nova Scotia Premier John Hamm told a Canadian Offshore Resources Conference in Halifax that a costly drilling regulation will be eliminated and that EnCana’s Deep Panuke project will get “new consideration.”
Until now flow tests have been required for each exploratory well at a cost of about C$10 million for an initial well and C$4 million for each subsequent well to provide geological information for industry, governments and regulators. The change will give companies the freedom to decide if and when the tests will be conducted.
Hamm said the objective is to “get the drill bits turning” in a region that has been crippled by a lack of drilling success, abandoned licenses and high costs.
“All of us in government need to be sure that our actions don’t create artificial barriers to getting drilling done,” he said.
“We’re listening and we’re removing another barrier to exploration.” EnCana prepares to drill Taking a bump out of the regulatory process comes as EnCana and its junior partner Marauder Resources East Coast prepare to drill the first well in more than a year.
They have contracted with Rowan to obtain the services of Gorilla VI to spud the shallow-water Dominion J-14 well in mid-November on trend with EnCana’s Deep Panuke discovery.
The result will be a key factor in determining the fate of Deep Panuke, which has been stalled for almost three years while EnCana tried to improve the economics by adding to the proven reserves of 935 billion cubic feet, streamline the regulatory regime and probe ways to possibly share infrastructure with the ExxonMobil-operated Sable offshore field.
Hamm told the Halifax conference that his government has also entered the picture in hopes of reviving the C$1.1 billion project.
“It’s time for (Deep Panuke) to receive new consideration,” he said. “We believe it is viable and, with further exploration, will be larger than one would anticipate if you look at today’s proven reserves.”
Hamm said he would like to see EnCana file a new development plan before he retires from politics in early 2006 and is confident “the elements are there … what remains to be done is a negotiations that balances the interests of all parties.”
For Hamm the only unresolved question is how big Deep Panuke will be. EnCana was typically cautious on that score, saying only that many options have been discussed, including faster regulatory approval and in collecting more data on the geology under the ocean floor.
It also appears that EnCana has recovered from setbacks earlier this year, when Marauder withdrew from a 35 percent working interest after failing to raise C$25 million to cover a 70 percent share of the well.
Under a new agreement that has seen EnCana take on a larger share, Marauder will earn 20 percent in the exploration license.
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