|
Making headway in a tough arena Offshore Newfoundland pumping 350,000 barrels of oil per day, making renewed advances on Hebron/Ben Nevis project Gary Park Petroleum News Calgary Correspondent
Offshore Newfoundland, for all of its daunting environmental challenges and painstaking regulatory processes, is one of the world’s most profitable basins for oil producers.
Gordon Carrick, Petro-Canada’s East Coast vice president, told an investor seminar in March that his company’s operating costs for its share of Hibernia and Terra Nova, the two producing fields were C$2.56 per barrel including insurance in 2003, down from C$3.20 in 2002.
In comparison, operating costs in the North Sea in 2002 have been estimated at C$7.19 per barrel.
Output from the two fields averaged about 358,000 barrels per day in 2003, up 24 percent from 2002, and will grow by another 92,000 bpd in 2006 when the White Rose field, owned 72.5 percent by Husky Energy and 27.5 percent by Petro-Canada, comes on stream.
In addition, Carrick said Petro-Canada expects growth opportunities will begin to come online from the Far East block of Terra Nova, which has recoverable reserves of 40 million barrels and the Ben Nevis/Avalon reservoir of Hibernia, which is believed to hold 150 million barrels of proved plus probable reserves. Pressure up on Hibernia management The Canada-Newfoundland Offshore Petroleum Board has increased the pressure on the Hibernia management by setting a mid-2004 deadline for a plan showing how the partners expect to delineate the northwest portion of Ben Nevis/Avalon, insisting that is the only way the commercial potential can be evaluated.
Last year the regulator said production from the pool could last for five years, but warned that the “single biggest unknown factor in determining the life of the Hibernia field is the extent of the ultimate recovery from the Ben Nevis/Avalon reservoir.
It said the reservoir, which potentially holds 453 million barrels although proven reserves are only 69 million barrels, is “significantly more complicated that was originally anticipated.”
If the Hibernia partners drill one or two more wells, the board is ready to extend the evaluation period for the field to mid-2005 from the current deadline of September 30. Petro-Canada investigating subsea tie-backs Coupled with its expansion plans, Carrick said Petro-Canada – the only company with a stake in all of the major Newfoundland fields — is investigating the economics of subsea tie-backs of smaller discoveries and prospects to the existing Hibernia, Terra Nova and White Rose hubs.
He said preliminary work conducted in 2003 has identified six potential add-on prospects with reserves ranging from 20 million to 200 million barrels — three near Hibernia, two near Terra Nova and one near White Rose.
“Now that we have narrowed the field, we will begin more detailed work, potentially leading to exploration drilling in the next year or two,” he said. “It will be absolutely critical to minimize the installation costs. Two key drivers of cost are marine construction and ice management. We will need to find innovative technologies to make these small projects economic,” Carrick said.
In the meantime, White Rose operator Husky has increased reserve estimates for the field by 60 million to 90 million barrels from the earlier 200 million to 250 million barrels and added up to 250 billion cubic feet of gas to the earlier 2.1 trillion cubic feet, although there are no immediate plans for developing Newfoundland’s gas. Quiet stirrings in Hebron-Ben Nevis With Hibernia and Terra Nova delivering consistent results and White Rose ahead of schedule for its start-up, there have been quiet stirrings of activity in the Hebron-Ben Nevis project, which has been on the backburner for two years since operator Chevron Canada Resources halted plans for a possible 2005 start-up to devise a more economically feasible development plan.
That field has about 600 million barrels of recoverable oil, but the geology is extremely fractured, requiring more wells than Newfoundland’s other fields, and 75 to 80 percent of the crude is 18-21 degrees API gravity.
Carrick rated Hebron/Ben Nevis as a “significant future asset” that could yield 38,000 bpd for Petro-Canada, putting total output at 158,000 bpd for the four partners — Chevron Canada 28 percent, ExxonMobil 38 percent, Petro-Canada 24 percent and Norsk Hydro 10 percent.
Petro-Canada Chief Executive Officer Ron Brenneman told a conference call in April that although the project remains officially on hold, the owners are working on improving the economics and should reach a decision this year on whether to move it forward, which might only mean sanctioning work to determine whether the development concept and costs make sense.
A Chevron Canada spokesman told Petroleum News that the objective is to have “all partners see the project in the same way.” Engineers exploring offshore platform options Among the signs of an emerging commitment to the project, Chevron Canada engineers are exploring various offshore platform options, including a central gravity base structure like that used for Hibernia; a wellhead gravity base structure; a floating production, storage and offloading vessel, the choice for both Terra Nova and White Rose; and a subsea tie-back to the Hibernia platform.
At the same time, the partners are in discussions with the Canadian and Newfoundland governments on a critical issue. They are seeking a different royalty regime that makes allowance for the heavier crude from Hebron/Ben Nevis.
The next generation of exploration frontiers for the Grand Banks is the Orphan basin, which attracted a startling C$673 million in bids for eight parcels at a December auction.
Against a background of declining exploration drilling, the Orphan purchases by Chevron Canada, ExxonMobil and Imperial Oil lifted optimism in an area where preliminary seismic results point to a basin containing 6 billion to 8 billion barrels.
Dave Einarsson, president of Geophysical Service, a seismic surveying company, said the seismic shows Orphan is “more uniform and bigger (than the producing Jeanne d’Arc Basin to the south) in the same geologic zone, so it’s got much more potential.”
Newfoundland Energy Minister Ed Byrne said the bidding process was “very competitive ... which reflects confidence in and certainly suggests the potential for large discoveries in the basin.”
The deepwater basin covers 7,800 square miles in water depths of 660 feet to 10,000 feet, with oil deposits lying 6,660 feet to 16,400 feet below the ocean floor. Companies moving cautiously The companies have until December 2008 to comply with the first phase of their work commitments and all are moving cautiously, beyond suggestions of a seismic program within two years to allow a detailed analysis of drilling targets.
Icebergs and pack ice pose a constant threat in the region, but Dan Walker, president of Oceanic Consulting, told a Newfoundland Ocean Industries Association conference in April that the lessons already learned will be “appropriate to the Orphan basin (where) there’s no show-stoppers in my opinion.”
He said Orphan will face about three times the average 44 icebergs seen in the Hibernia and Terra Nova area each year, with the Orphan icebergs four to five times the tonnage.
However, the deeper waters make it less likely the icebergs will run aground, compared with the shallower waters of Jeanne d’Arc.
| 