Shell Canada rejoins hunt for oil offshore Newfoundland

Petroleum News

Just days after the Newfoundland, Nova Scotia and federal governments announced they intended to streamline oil and gas permitting for Atlantic Canada’s offshore, Shell Canada said it was returning to the region with the acquisition of a 20 percent stake in eight exploration licenses in the Orphan basin, a deepwater region offshore Newfoundland 120 miles northeast of Hibernia. (See related story on page B5 of this issue.)

Although Shell has a minority stake in the Sable project offshore Nova Scotia, the last time the oil giant worked offshore Newfoundland was as a minority partner in a dry hole in the Jeanne d’Arc Basin in 1990.

The interest in the Orphan licenses, operated by 50 percent owner Chevron Canada, was acquired under a farm-in agreement with ExxonMobil Canada and Imperial Oil, Shell Canada said in a news release.

“This farm-in is consistent with Shell Canada’s renewed focus on growth — in this case, we’re broadening the scope of our exploration activities by gaining access to a new, unexplored deepwater basin,” Dave Collyer, vice president of Shell Canada’s frontier division, said in a March 2 press release. “Advances in technology are allowing industry to pursue these challenging, but potentially high-reward, deepwater ventures. We look forward to returning to offshore Newfoundland.”

Fewer than 10 wells have been drilled in the Orphan basin and all in the shallower part of the basin.

The government of Newfoundland spurred interest in the basin when it conducted largely deepwater seismic studies, which indicated a potential for major oil strikes.

Shell said the partners’ current exploration plans on the eight licenses call for 3-D seismic acquisition this summer.

The other three partners said earlier this year they were working on the details of gathering 6,000-8,000 square kilometers of three-dimensional seismic in the Orphan basin.

They planned to start gathering seismic in the May-September period, in what a Chevron spokesman said was a “very promising unexplored area,” where preliminary two-dimensional studies by seismic survey company Geophysical Service have indicated up to 8 billion barrels of oil.

Shell said the eight licenses were initially acquired by Chevron (50 percent), ExxonMobil (25 percent) and Imperial (25 percent) in a land sale in December 2003.

Under the terms of the agreement, ExxonMobil and Imperial will each reduce their shares by

10 percent to provide Shell with a 20 percent interest, Shell said.