Foreign-Crewed Rig Gets OK to Drill Offshore Canada

A big win came Friday for a Houston-based oil and gas company operating off Nova Scotia. Marathon Oil will not have to use an oil rig crewed with Canadians.

A federal tribunal, the Canadian Transport Agency, ruled Marathon can import a foreign-crewed rig from the U.S. to drill this spring at a natural gas exploratory well about 350 kilometers southeast of Halifax.

The Norwegian owners of the world's largest oil rig, crewed mainly with Canadians, objected to the agency and tried to get the work by getting its vessel reflagged Canadian. Late Friday afternoon, the agency released a brief decision ruling in Marathon's favour and said it will issue detailed reasons for its determination soon.

"In the present case, the agency concludes that there is no Canadian ship or non-duty-paid ship suitable and available to provide the service or perform the activity described in the application," a three-member panel ruled.

Doug Hollett, Marathon Oil Canada vice-president, said the verdict is a good decision for the company and Nova Scotia.

"We are glad to be able to move forward," said Mr. Hollett, who works in the Halifax office. "It's important for us and important for Nova Scotia because it is the only deepwater well to be drilled offshore Nova Scotia this year."

Mr. Hollett said this decision gives the company the green light to drill the Crimson well, located near a gas discovery made by Marathon a few years ago.

Ocean Rig's chairman, Geir Aune, reached in Stavangar, Norway, would not discuss the decision or say whether the company plans to appeal.

"I cannot comment on the matter," he said Friday.

Ocean Rig argued it should be given preference because its crew is Canadian and it was retrofitted in Halifax for about $250 million. In its bid to win the lucrative drilling contract, Ocean Rig was seeking Ottawa's approval to have the Eirik Raude, a Bahamian-registered vessel, reflagged Canadian.

That process is still ongoing, and Mr. Aune would not comment on whether it will continue its application.

Marathon claimed using the Eirik Raude would cost an extra $10 million and that the rig is technically unsuitable.

A group representing more than 500 companies operating in the offshore was pleased a decision had been reached. "The potential of a delay or cancellation of drilling the well was of great concern to the industry," said Paul McEachern, managing director of the Offshore/Onshore Technologies Association of Nova Scotia. He said the association was not taking sides but wanted clarity on the issue.

"If the decision dragged on, it would keep jobs in Ottawa but kill some in Halifax," he said.

Mr. McEachern said several local suppliers had won tentative contracts with Marathon for supplying helicopters and supply boats. OTANS had intervened in the dispute, urging Ottawa to make a speedy decision.

The matter started after Ocean Rig learned on Dec. 2 that Marathon's broker had received permission from the agency to bring in the Deepwater Pathfinder, owned by Transocean of Houston.

On Dec. 12, Ocean Rig ASA filed an objection, saying it would have the drilling rig Eirik Raude Canadian-flagged and available in mid-May.