Canadian Oil Cos See Slight Hit from Deepwater Moratoriums

CALGARY (Dow Jones Newswires), June 15, 2010

Canadian petroleum companies engaged in offshore oil and gas production said Monday that they expect only a slight effect on their operations due to international moratoriums on deepwater drilling.

Nexen President and Chief Executive Marvin Romanow, whose Calgary-based company has delayed an exploration well and an appraisal well in the Gulf of Mexico because of the U.S. moratorium on deepwater drilling, said at an industry conference that the effects of the moratoriums would likely be modest.

"I expect that, of the rule changes that we will see in the United States, the bulk of them would be adopted as best practices by operators in any case," Romanow said at the Canadian Association of Petroleum Producers' 2010 investment symposium in Calgary.

Worldwide, Romanow said deepwater operators "will take a little more time to do things, as we will probably have more regulatory review...this will add more time to our activities but the cost additions, I believe, will be modest."

The U.S. government extended in May a moratorium on deepwater drilling by six months in the wake of the spill in the Gulf of Mexico caused by an accident aboard the Deepwater Horizon rig leased by BP that also claimed the lives of 11 workers.

Nexen has said it delayed a Gulf of Mexico exploration well in its Kakuna prospect and a Gulf appraisal well for its Appomattox discovery.

In the United Kingdom side of the North Sea, where Nexen is the second-largest oil producer with an average production of 102,000 barrels of oil a day last year, Romanow said the company was likely to have more third-party inspections of its drilling rigs.

On the other side of the North Sea, Norway's government said it won't approve any more deepwater-drilling licenses until the investigation of the cause of the BP spill is complete.

Nexen owns exploration rights to nine parcels in the North Sea and expects to participate in the licensing process this year.

Talisman President and CEO John Manzoni said the ban on new deepwater-drilling licenses in Norway won't have an immediate effect on Talisman's operations there, which produced 44,000 barrels a day last year and where the company's Yme project under development is expected to come on stream later this year.

"We're taking stock of our exploration portfolio and exploring some opportunities, but the deepwater-licensing pause isn't going to happen immediately," Manzoni said.

Manzoni, who spent 24 years as an executive at BP, said Talisman has "checked and continue to check well design and control procedures" in the wake of the Gulf of Mexico spill.

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