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Jurisdictional feuds slow Atlantic Canada’s progress Undersea boundaries, revenue-sharing clutter table in area where federal and five provincial governments must reach agreement Gary Park Petroleum News Calgary correspondent
Hopes of an energy bonanza in Atlantic Canada to rival that of the North Sea or Gulf of Mexico need an infusion of new optimism in 2004 if the region is to profit from its hydrocarbon riches.
Above all, that means rapid progress to settle a raft of inter-governmental squabbles to open up new exploration regions, reverse years of drilling failures and capitalize on the proximity to energy-hungry markets in the U.S. Northeast.
It also requires decisive measures by governments to streamline environmental assessment processes and end duplication and overlap that have bogged down projects in an already high-cost, high-risk area.
The first reversal of fortunes occurred in last month’s blockbuster land sale for the Orphan basin, with Chevron Canada Resources, Imperial Oil and ExxonMobil Canada bidding a record C$673 million for eight parcels.
In the view of some industry leaders, Atlantic Canada must drill at least 10 to 15 exploration wells a year to sustain any kind of momentum — a modest objective given that only 350 wells have been completed in the past 25 years, compared with 15,000 in the Gulf of Mexico. Regulatory and tax issues block drilling However, standing in the way of tapping into billions of barrels of oil and trillions of cubic feet of natural gas are regulatory and tax issues that have become bogged down in inconclusive bickering.
The resulting damage to Atlantic Canada’s image, compounded by a series of dry holes, has prompted a number of companies to either abandon properties or try to sell, trade or farm-out leases.
All this at a time when the East Coast needs a “major discovery” to draw positive world attention, Steven Paget, an analyst at FirstEnergy Capital, said in a recent report.
But a change of leadership in the Canadian government and new governments in Newfoundland and Quebec have stirred confidence that jurisdictional matters will get fresh attention. Newfoundland pressing for negotiations Newfoundland Mines and Energy Minister Ed Byrne is already pressing for early negotiations with the federal government, Quebec and France.
Topping his agenda is renegotiation of a 1980s accord that established federal and provincial management and revenue sharing for the offshore.
The goal, Byrne said, is to ensure his province is the principal beneficiary of its oil and gas wealth. “It is clearly one of the most challenging and complex issues this government will be dealing with in the early days of our mandate,” he said.
Next is the need to wrap up four years of talks with France over a trans-boundary dispute involving Newfoundland and the French territorial islands of St-Pierre and Miquelon.
“Significant progress has been made,” Byrne said in a pre-Christmas speech to the Newfoundland Ocean Industries Association. But the “lack of ground rules creates uncertainty for companies and governments.”
At stake are potential reserves of 700 million barrels of oil and 9 trillion cubic feet of natural gas, with ConocoPhillips Canada, ExxonMobil, Imperial Oil, Kerr-McGee and Murphy Oil as primary leaseholders in the 8.6 million acre play.
In a separate wrangle, Newfoundland is about to start talks with Quebec over Hydro-Quebec plans to launch exploration in the Gulf of St. Lawrence, chasing what it believes to be 5 trillion cubic feet of gas potential.
Quebec is calling for management and revenue-sharing accords with the Canadian government similar to those operating for Newfoundland and Nova Scotia. Six governments involved But the federal government is pressing for Quebec and the four Atlantic Canada provinces — Newfoundland, Nova Scotia, New Brunswick and Prince Edward Island — to agree on their undersea boundaries.
With six governments involved, no one is betting on an early resolution.
For openers, Byrne has flatly rejected suggestions of a single regulatory board for the Atlantic region, but he sees some hope in efforts by the Energy Roundtable, which brings together the East Coast industry, with federal and Atlantic Canada governments.
He said that so long as the roundtable “remains focused on real issues and does not stray off into fanciful and divisive discussions — such as the call for a single East Coast regulatory board — then it will have the support of our government.”
Byrne’s government, like its predecessors, is anxious to see oil finds that will prolong the life of its infant industry along with progress to develop its gas resources, which include 4.2 tcf off Labrador and 5.6 tcf off the Grand Banks, with the potential for 60-70 tcf that compressed natural gas technology could advance.
Finally, tying up some loose ends between Newfoundland and Nova Scotia, including an environmental assessment procedure, could open the exploration door to the Laurentian sub-basin, which Byrne noted is close to mainland markets and does not pose the same challenges as the storm-tossed, iceberg-infested waters off the Labrador Shelf and Grand Banks.
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