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Shell abandons first deepwater exploration well off Nova Scotia

The Shell logo at a petrol station in London. Shell has abandoned the first of its deepwater exploration wells off Nova Scotia, saying it didn't find enough oil for commercial production.

Shell has abandoned the first of its deepwater exploration wells off Nova Scotia, saying it didn't find enough oil for commercial production.

Work on the Cheshire well, about 250 kilometres off Halifax on the Scotian Shelf, was completed last week, the company says.

Shell says it is now turning to a second exploration well about 120 kilometres away.

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"It is important to keep in mind that the Shelburne Basin is an unexplored deepwater basin so the resource potential is uncertain," said Cameron Yost, a spokesman for the firm, in an e-mail.

"That's why we're conducting an exploration program: to evaluate the potential of hydrocarbons within the exploration licences and, if hydrocarbons are found, determine whether the volumes are substantial enough to warrant a commercial development."

He said the results are based on the firm's analysis of the subsurface geology at the location of the well, but he wouldn't comment on whether there had been any signs of oil or gas.

Suncor Energy Inc., a joint-venture partner on the exploration well with Shell, said it will write off costs tied to the project. Suncor holds a 20-per-cent stake in the project and said it would write off its share of the costs in the third quarter, about $105-million after tax.

Grant Wach, a petroleum geologist at Dalhousie University, said it's too early to be discouraged by the abandoning of one well in the early stages of exploring the deep waters off the Scotian shelf.

"It probably took 30 wells to find the (Newfoundland) Grand Banks discovery. One well in a completely unexplored basin, that's why you're drilling. You don't know what's there," said the expert in reservoir characterization.

However, he said if the second well isn't commercially viable that will cause some petroleum geologists to "scratch their heads" and possibly reassess exploration plans.

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"People really believe there's something here," he said, adding that Norwegian company Statoil acquired exploration licences about 200 kilometres off Nova Scotia late last year.

The company says the second exploration well, Monterey Jack, is southwest of the Cheshire location. A contracted vessel will open the exploration well by the end of September.

The Cheshire well was the location where the ship contracted to drill the well dropped two kilometres of pipe and other drilling gear onto the ocean floor on March 5.

With files from Globe Staff

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