Shell Disappointed with Onondaga Exploration Well Results

Shell Canada Limited announced that the Onondaga B-84 exploration well will be suspended as a potential natural gas producer. The 100-per-cent Shell-owned well was drilled in the Sable sub-basin offshore Nova Scotia, 27 kilometers southwest of Sable Island.

The B-84 well is located approximately one kilometer south of a Shell well which discovered gas in the Upper Mississauga Formation in 1969. It confirmed the presence of sweet, hydro-pressured gas in this formation and successfully delineated the previous discovery.

However, the primary objective of the B-84 well was to evaluate a previously untested deeper section identified from more recent seismic surveys. The well encountered indications of gas throughout the deeper interval and some potential reservoir sections, but overall reservoir development was insufficient to warrant production testing at this time. As a result of operational constraints, the well could not be drilled to its total prognosed depth to permit full evaluation of the target interval.

"We are disappointed that the well did not reach total depth and did not confirm a larger natural gas accumulation in the deeper section, which may have supported an expansion of existing infrastructure. However, the reserves confirmed by this well will contribute to maintaining longer term gas production from the Basin," said Ray Woods, Resources Senior Operating Officer, Shell Canada Limited.

The total cost of the well was approximately $90 million, $25 million of which was related to drilling the Upper Mississauga Formation and will be capitalized. A decision on the accounting treatment of remaining costs for the well will be made when technical reviews of data from the deeper zones are completed later this year.

Shell has a significant presence offshore Nova Scotia, owning 31.3% of the Sable Offshore Energy Project offshore assets and holding an interest in approximately 900,000 hectares of exploration lands. Shell will continue to evaluate other exploration opportunities offshore Nova Scotia.