New North Sea Beckons Oil Producers Off Canada’s East Coast

(Bloomberg) -- A change to an obscure shipping law is helping draw major oil companies to an area off Canada’s east coast that may rival the North Sea for its production potential. 

Exxon Mobil Corp., Chevron Corp., Statoil ASA, BG Group Plc and BP Plc are among the companies that committed to spend C$1.2 billion ($934 million) in auctions last November by the province of Newfoundland and Labrador for seven parcels off the coast. Now the government is adding 13 new parcels in an auction set for this November, as the removal of a decades-old shipping restriction opened the area to more vessels seeking oil and natural gas.

In the past, the sole domestic seismic ship used to locate potential oil deposits was operated by a Canadian company, Geophysical Services Inc., or GSI. That’s because the nation’s maritime law gave domestic businesses the ability to block the use of foreign-owned vessels. That barrier was removed in 2012, and since then a small squadron of ships has been collecting offshore data on more than 82,000 square kilometers (32,000 square miles) in partnership with the regional government. That data, available to companies in the next auction, more than doubles the area for exploration. Last year, five ships were collecting data off the province’s coast.

“What we are seeing here is similar to North Sea Norway in terms of its potential,” said Ed Martin, the former chief executive officer of Nalcor Energy, the province’s oil company, who spearheaded efforts to open new offshore areas and cited Norway as a model.

The exploration blocks awarded last year may hold as much as 12 billion barrels of oil, several times bigger than the province’s biggest field Hibernia, according to Nalcor. The 13 new parcels to be auctioned are in the Eastern Newfoundland and Jeanne d’Arc areas. The province is expected to offer as much as 2 percent more area annually thereafter.

Norway, pumping about nine times more offshore crude than Newfoundland and Labrador, has drilled eight times as many exploratory wells off its coast, according to Nalcor data. Oil has helped make the Nordic country Europe’s second richest per capita behind Luxembourg, according to World Bank data.

That promise is spurring Canada’s energy hopes even after prices cratered. Crude’s drop from more than $100 a barrel in 2014 to below $30 earlier this year hit the provincial economy hard. Offshore royalties account for just 9 percent of revenue in the Newfoundland Labrador 2016-2017 budget, down from 37 percent two years ago.

Crude Rout

While results from the first auction show promise, the price of oil remains low at around $46 and drillers have trimmed their budgets.

“It’s not an ideal macro situation for Newfoundland expansion,” said Mark Oberstoetter, lead analyst for upstream research at Wood Mackenzie in Calgary. “We are seeing exploration spending activity cut around the world.”

West Texas Intermediate declined 49 cents to $46.21 a barrel on the New York Mercantile Exchange on Friday.

BP and Chevron declined to comment on their interest in the area. Statoil, Exxon and BG’s owner Royal Dutch Shell Plc didn’t immediately respond to e-mails or phone calls seeking comment.

Similar to the U.S. Jones Act, that old shipping law, known as the Coasting Trade Act, was written to protect Canadian-flagged vessels from foreign competitors in domestic waters. Included in its remit were seismic vessels, even though only one was registered in Canada before 2011, according to PennEnergy Research, which tracks ships. That vessel belonged to GSI.

Foreign Vessels

Under the law, companies that wanted to use a foreign vessel for testing would have to apply for a license. Canadian-based firms could object, often blocking approval. That occurred six times between 2000 and 2006, with GSI the blocking company, according to Wes Foote, Newfoundland’s assistant deputy minister for petroleum development.

In 2011, Nalcor partnered with Asker, Norway-based TGS Nopec Geophysical Co ASA and Oslo-based Petroleum Geo-Services ASA to invest in a multi-client 2D seismic survey of the province’s waters. The plan was hindered by the Coasting Trade Act, spurring the government to change the law’s wording on seismic vessels.


12

View Full Article

Copyright 2017 Bloomberg News.

WHAT DO YOU THINK?

Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Related Companies
 Company: BP plcmore info


 - BP Restores Power At Thunder Horse Platform After Outage (Sep 20)
 - BP's Thunder Horse Platform Shut Temporarily On Power Issue (Sep 19)
 - Big Oil Becomes Greener With Progress in Cutting Pollution (Sep 18)
 Company: Exxon Mobil Corporationmore info


 - ExxonMobil Starts Fuels Production at Baytown, Beaumont (Sep 21)
 - Far From the Texas Coast, Hurricane Harvey Hits Oil Refiners (Sep 19)
 - Big Oil Becomes Greener With Progress in Cutting Pollution (Sep 18)
 Company: Statoilmore info


 - Statoil Sees Eagle Ford Operations Back At Normal This Weekend (Sep 7)
 - Poland's PGNiG To Receive LNG Spot Delivery From Statoil In September (Sep 5)
 - Harvey's Wake Tempers Bullish Outlook for US Oil Output Growth (Sep 1)
 Company: TGS-NOPEC Geophysical Companymore info
 - TGS Expects E&P Spend to Dip by up to 10% in 2017 (Oct 28)
 - Schlumberger, TGS Begin 300-Block Gulf of Mexico Data Acquisition Program (Aug 4)
 - PGS: Improving Sentiment in Offshore Seismic Market (Jul 21)
 Company: BG Groupmore info
 - Shell Mulls LNG-Hub Network as Use by Ships and Trucks Expands (Jul 11)
 - Tanzania Laws Would Allow Govt to Tear Up Mining, Energy Deals (Jun 29)
 - Despite Cuts, Big Oil to Expand Production into the 2020s (Sep 5)
 Company: Chevron Corporationmore info
 - Sources: Chevron Drills Oil Well In Iraqi Kurdish Area After Two-Year Gap (Sep 20)
 - Big Oil Becomes Greener With Progress in Cutting Pollution (Sep 18)
 - Chevron's Watson Said to Plan to Step Down, Journal Reports (Aug 22)
 Company: PGSmore info
 - PGS Raises Funds Through Private Placement (Nov 23)
 - PGS: Improving Sentiment in Offshore Seismic Market (Jul 21)
 - OGA Awards Contracts for UK Government Funded Seismic Campaign (Jul 13)
 Company: Royal Dutch Shell plcmore info
 - Big Oil Becomes Greener With Progress in Cutting Pollution (Sep 18)
 - Shell Set To Draw Line Under A Century Of Iraqi Oil (Sep 13)
 - Shell Canada Shuts Some Gas Operations Due To Southern Alberta Wildfire (Sep 12)
Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE



Most Popular Articles

From the Career Center
Jobs that may interest you
Automation Engineering Manager
Expertise: Electrical Engineering|Engineering Manager
Location: Houston, TX
 
Senior Accountant
Expertise: Accounting
Location: Chantilly
 
Channel Development Manager Job
Expertise: Business Development|Sales
Location: Minneapolis, MN
 
search for more jobs

Brent Crude Oil : $56.86/BBL 0.76%
Light Crude Oil : $50.66/BBL 0.21%
Natural Gas : $2.959/MMBtu 0.30%
Updated in last 24 hours