The government of Newfoundland and Labrador says there is as much as 30 billion barrels of oil equivalent that is expected to be found in an unexplored area of its deep-water offshore, as the province looks for billion-dollar drilling commitments from international oil companies to expand its production.
In an telephone interview from St. John's, Ed Martin, chief executive officer of provincially owned Nalcor Energy, said the province's Flemish Pass area ranks as one of the top undeveloped areas in the world, particularly as companies such as Royal Dutch Shell PLC turn away from risky ventures in the Arctic.
The province's premier, Paul Davis, released an assessment by French geophysical firm, Beicip-Franlab, that estimates that an 11-parcel block currently being auctioned in the Flemish Pass has the potential to contain 12 billion barrels of crude and 113 trillion cubic feet of natural gas. Beicip-Franlab based that estimate on seismic and satellite data collected by Nalcor and private sector partners that conducted a four-year, $240-million exploration program.
"Those [resource estimate] numbers would indicate that there is a strong probability that you could have several Hibernias in that one sector," said Mr. Martin.
He was referring to the project that established the province's offshore industry some 30 years ago. "It's big – they're big numbers and it's pretty exciting," he said.
The province is now conducting its first scheduled sale of the offshore leases, the results of which will be announced in mid-November. Previously, oil companies would do their own seismic work and then ask the offshore regulator to hold a land sale so they could bid on the property. With the province now controlling the data, it plans to hold a series of auctions over the next several years.
Despite depressed oil prices, Mr. Martin insisted the global cutbacks in exploration budgets won't derail the province's plan for deep-water development, which are focused on the longer term. Even as oil prices fell over the past year, the sale of data on the Flemish Pass has "grown exponentially," he said, adding that it is a clear indication of interest among oil companies.
"We place ourselves against the few remaining frontier areas that show significant potential but are underexplored," he said. "That's what the supermajors are looking for – and that includes Brazil, Mexico and ourselves."
Nova Scotia is also seeing renewed interest in its offshore. BP PLC completed a seismic program last year and is partnering with Hess Corp. and Woodside Petroleum Ltd. to work on four Nova Scotia offshore deep-water exploration blocks.
Mexico recently concluded a lease sale for its deep-water offshore, and the Italian major Eni SpA led the bidders who committed to three of five blocks on offer.
Nalcor CEO Mr. Martin noted that just days after Shell announced it was halting its Arctic exploration in Alaskan waters, BG Group PLC revealed that it was purchasing stakes in three exploration blocks in the Newfoundland offshore. Shell is in the final stages of acquiring BG for $70-billion (U.S.).
With its partner Husky Energy Inc., Statoil ASA is currently drilling a well at its Bay du Nord site in the Flemish Pass, one of three significant discoveries the Norwegian company has had in the basin. Statoil says more work needs to be done to determine how the partners will proceed with development.
Since the Hibernia field began producing in 1986, Newfoundland and Labrador has ridden the oil industry to prosperity – particularly after prices began to climb in 2002. The industry accounted for 28 per cent of the provincial economy in 2013, and contributed 28 per cent of provincial revenue. But the slump in prices since last summer has sent the province back into deficit, as the value of crude production fell from $9-billion (Canadian) in 2013 to a forecast of $6-billion this year.