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Exploration drilling delayed at Orphan Basin off coast of Newfoundland

A pair of exploration wells at the Orphan Basin won't be drilled this year as planned.

The partners, including ExxonMobil and Chevron Canada, will delay the next round of deepwater drilling off Newfoundland's northeast coast until 2008 or 2009.

That delay will hit the bottom lines of local companies providing supplies and services to the Eirik Raude, one of the biggest drill rigs in the world.

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The Orphan partners had originally planned to drill two more wells in the basin as early as this summer.

"The second exploration well now will be drilled in 2008-09, pending regulatory and owner approval," said Margot Bruce-O'Connell, spokeswoman for ExxonMobil in St. John's.

A third well is in the planning stages.

"This is a result of delays in completing the first well, the Great Barasway. That's due, in large part, to mechanical problems with the Eirik Raude."

One offshore industry executive said the delay could cost hundreds of offshore jobs.

"It's extremely disappointing," the executive, who did not want to be named, told the St. John's Telegram.

"The net loss of jobs I could be up to 500 jobs."

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Those jobs include full-time rig crews, offshore supply boat crews, divers, well logging and testing personnel, weather observers and caterers.

"With no energy plan in place, no gas royalty regime in place, no Hibernia South, no Hebron and now no exploration activity - when are we going to see this industry develop?"

Another industry executive, who also didn't want to be named, pegged the payroll loss of a rig, such as the Eirik Raude, at more than $1-million per month.

"It's grossly disappointing."

The Eirik Raude started drilling Great Barasway, the partners' first Orphan well, in August.

The rig returned to the basin Monday following repairs at the Kiewit Offshore Services facilities at Marystown. It was the third bout of mechanical problems this winter.

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The rig will resume drilling once it reconnects to the well.

"There's no question that the experience with the Great Barasway reinforces, really, the high-risk, high-cost nature of exploration in harsh environments," said Bruce-O'Connell.

"Offshore exploration in these harsh environments does really require the highest level of technical and financial capability."

ExxonMobil said the one- or two-year delay in its exploration program is a temporary setback.

"The partners are committed to the Orphan Basin exploration program. That's really the bottom line," said Bruce-O'Connell.

The Eirik Raude has a two-year contract with ExxonMobil, and is next scheduled to drill wells for the company in the Gulf of Mexico.

Drilling activity consumes more equipment, goods and services than the production side of the offshore oil business.

"Drilling is king," said Geoff Cunningham, manager of offshore operations for A. Harvey and Co.

The company runs the marine offshore base for the three producing oilfields off Newfoundland, the drill rigs and support ships.

That business has steadily grown, but a delay in the Orphan Basin exploration program isn't good news.

As well, the Henry Goodrich drill rig is scheduled to leave when it finishes the last of the Terra Nova development wells some time this summer.

"This is a bit of a backward step, to say the least," said Mr. Cunningham. "But it's not going to be a ghost town down here. Blood pressures will go back to, we'll say, a dull roar."

He expects the Orphan partners to resume exploration drilling in future.

"We hope they're back sooner than later - 2008 will be fine."

But not all companies are worried about the exploration delay.

Andrew Collins, manager of marketing and sales for P.F. Collins, says ups and downs are part of the oil industry.

"It's a tough environment."

The company moves freight and warehouses spare parts, such as valves, and tools for the offshore industry.

Mr. Collins doesn't doubt the Orphan partners will resume exploration drilling later.

"They're still following the commitment that they've made. It's just a timing issue," he said. "To say we're disappointed that they won't be drilling here this summer is really not the case. I'm just disappointed that things take so long."

Mr. Collins said any reduction in drilling activity will be temporary.

"It's going to come back. We're still quite optimistic about this year and next."

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