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Long dry spell at Grand Banks compounded by setbacks Canada’s East Coast offshore energy frontier beset by cost overruns, lack of new commercial discoveries Gary Park PNA Canadian Contributing Correspondent
The Grand Banks — long hailed as Canada’s second energy frontier after Western Canada — are starting to take on the appearance of the Not-so-Grand Banks.
Within six years, four fields — Hibernia, which has been producing for two years and is targeting 185,000 barrels per day in 2001, Terra Nova, White Rose and Hebron-Ben Nevis — are supposed to be pumping 400,000 barrels per day, close to 20 percent of the national daily oil output, or 40 percent of its conventional crude.
But, with Newfoundland’s offshore poised to generate unprecedented riches in an economically impoverished region, the great dreams are getting a rude awakening.
Frontier analyst Ian Doig, long a critic of the heavily government-subsidized beginnings for the East Coast oil fields, said the area “hasn’t yielded a new discovery in 15 years and no new players are appearing. It’s now doubtful if the basin has another commercial oil discovery to announce.”
The long, dry spell has been compounded in the last few weeks by a series of setbacks. Cost overruns at Terra Nova %]?$¼?a Nova field, 34 percent controlled by Terra Nova, has been hit with its second major cost overrun, bumping the price tag to C$2.5 billion from C$2 billion.
The 410-million-barrel field has also delayed its startup by three months to June 2001, dragging average output for next year to 30,000 barrels per day from 49,000 barrels, although the field is still expected to achieve full production of 129,000 barrels per day by late 2002.
Troubles began with the late arrival of a floating production, storage and offloading vessel from South Korea, labor problems at the construction site and now difficulties installing the vessel.
Simultaneously, the C$1.8 billion White Rose project — owned 82.5 percent by Husky Oil and 17.5 percent by Petro-Canada — has experienced a series of drilling setbacks that have failed to boost reserves from the established 250 million barrels of reserves.
Industry sources say Petro-Canada is stalling on signing a development application for White Rose, which should have been filed in July to achieve a 2004 start-up at 100,000 barrels per day, because of growing unease over costs and profit margins. Hibernia work on hold Compounding the woes, the Jeanne d’Arc Operations Group — led by ExxonMobil and including Chevron Canada, Petro-Canada and Norsk Hydro Canada — quietly ceased work in June in the Hibernia, Terra Nova and White Rose region after drilling three delineation and three exploratory wells.
The next test of industry confidence hangs on upcoming results of the Canada-Newfoundland Offshore Petroleum Board’s 2000 call for bids on 14 parcels covering 5.6 million acres.
Doig said a poor response to that call and a string of dry holes in the deepwater areas of the Grand Banks will see the industry “running not walking away from exploring offshore Newfoundland.”
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