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East outpaces West: Newfoundland offshore to see $4 billion in drilling
Gary Park for Petroleum News
The barometer of confidence in Alberta’s upstream oil and natural gas sector took a sickening plunge last year when the sale of government exploration rights hit a record low.
The final 2019 auction of leases raised a mere C$3.9 million, raising the year’s total to C$119 million, C$18 million below the previous low mark in 2016 and the weakest industry response since the bidding system was adopted in 1977.
The high point was set in 2011 when a bidding fever triggered by the Duvernay oil formation in northern Alberta generated C$3.5 billion in buying rights.
British Columbia also plunged to a new low point in 2019, with companies investing C$14.7 million, C$500,000 below the 2016 return, compared with the province’s highwater mark of C$2.66 billion in 2008.
Saskatchewan sales raised C$25 million last year, the lowest since 1992, while the record year in 2008 pumped C$1.1 billion into the government treasury.
Newfoundland But, almost unnoticed in this bleak picture, the Newfoundland offshore has attracted C$4 billion in spending commitments to identify that region’s next major oil project.
“There’s an unprecedented level of interest in offshore East Coast Canada,” said Jim Keating, executive vice president of offshore development at Nalcor Energy, a Newfoundland government corporation which holds minority equity stakes in three of four producing fields - Hebron, Hibernia, Terra Nova and White Rose.
He said the “significant” investment is partly due to new geosciences work and changes to the bidding regime, which has made the offshore a “must-be place for some of the world’s best explorers,” some of which have drastically scaled back their interests in Alberta’s oil sands.
Husky Energy’s West White Rose field is expected to yield its first commercial oil in 2022, while a sixth production site could proceed if Equinor (formerly Norway’s Statoil) develops its Bay du Nord project in the Flemish Pass area, 300 miles east of St. Hon’s, the Newfoundland capital.
The four operating projects have produced 19.9 billion barrels of oil since Hibernia came on stream in 1997, although current output of 257,000 barrels per day lags well behind the peak of 426,680 bpd in 2007.
The Canadian Association of Petroleum Producers has forecast Atlantic Canada will work back up to 354,000 bpd in 2026, then slide to 185,000 bpd in 2030.
However, Keating expects that Bay du Nord and possibly increased volumes from Hebron could raise the total to a new high.
“Our peak day is yet to come even with the projects that we know about, let alone the ones we have yet to discover,” he told the Financial Post.
He said that given technological advances, another four projects could be waiting for discovery, especially with companies such as China’s CNOOC, BP, Australia’s NP Group and Houston-based Navitas Petroleum poised to join the offshore’s existing five companies that hold exploration licenses - Husky, ExxonMobil, Chevron, Suncor and Equinor.
CAPP expects eight license holders will start exploration drilling over the next three years, targeting 10 of the possible 100 wells in their applications.
- GARY PARK
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