Oilweek East Coast Supplement November 2013

3

SUNNY,

WITH A CHANCE OF RAIN Statoil has new discoveries, but the future of offshore exploration remains uncertain

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Table of Contents

4

Editor’s Note

6

Exploration

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editorial Editor Dale Lunan | dlunan@junewarren-nickles.com Contributing Writer Wes Reid Editorial Assistance Manager Marisa Sawchuk | msawchuk@junewarren-nickles.com Editorial Assistance Shawna Blumenschein, Tracey Comeau, Sarah Eisner

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SUNNY, WITH A CHANCE OF RAIN Statoil has new discoveries, Hebron is underway, but future of offshore exploration may still be cloudy

By Wes Reid

Creative Lead/Senior Graphic Designer Cathlene Ozubko Graphic Designer Peter Markiw

Sales Sales Manager – Advertising Monte Sumner | msumner@junewarren-nickles.com Senior Account Executives Nick Drinkwater, Tony Poblete, Diana Signorile Sales Brian Friesen, Rhonda Helmeczi, Sammy Isawode, Mike Ivanik, Nicole Kiefuik, David Ng, Sheri Starko For advertising inquiries please contact adrequests@junewarren-nickles.com

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Enhanced Recovery

MAX DRIVE Memorial University’s Chevron Chair is leading the way to enhanced recovery in the offshore

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Labrador

Uncharted territory Nalcor’s January announcement opens new frontiers

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N o v e m b er 2 0 1 3 O I L W E E K s u p p le m en t

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EDITOR’S NOTE

In good hands The politics might be rocky, and environmental challenges remain, but there’s plenty to be excited about in Canada’s east coast offshore

THE OFFSHORE INDUSTRY ON Canada’s east coast has stagnated at times in the 16 years since Hibernia—the country’s first major offshore oil development—began producing, and while there are still issues with regulatory oversight and appropriate policy direction, the acts of exploring for and developing new resources are in good hands .

Causing the most stir, of course, is Statoil ASA (with partner Husky Energy Inc .) and its ongoing exploration work in the deepwater Flemish Pass area northeast of the Jeanne d’Arc Basin, home to Newfoundland’s three existing oil fields . The partners’ first well, at Mizzen, came up with 200 million barrels of recoverable reserves, while the third, at Bay du Nord, tapped a structure that could hold 600 million barrels of recoverable light crude—Statoil’s biggest operated discovery outside Norwegian waters . Development, however, won’t happen until after 2020 .

On the Grand Banks, ExxonMobil Canada and its partners have embarked on a $14-billion project to bring Hebron’s 700 million barrels of heavy crude into production by the end of 2017 . At White Rose, Husky Energy has launched its $1 .2-billion South

White Rose Extension that will tap into 24 million barrels of reserves from South White Rose and another nine million barrels from the southern tip of the main White Rose field . And northwest of the main White Rose field, Husky is drilling a delineation well which, if everything works out, could lead to the construction of a gravity base structure at Argentia to produce from the West White Rose Extension .

Offshore Nova Scotia, meanwhile, Encana Corporation has finally started producing from its Deep Panuke gas field; Corridor Resources Inc . remains interested in drilling the Old Harry prospect in the Gulf of St . Lawrence, the largest undrilled structure in the east coast offshore, prospective for as much as two billion barrels of oil or up to five trillion cubic feet of natural gas; and Shell Canada Limited recently completed a seismic project on four licences acquired last year with a $970-million work commitment . Drilling is still a few years away .

Maybe not the pace of activity we see in the Gulf of Mexico, but Canada’s offshore should be viable for quite a few years to come .

— Dale Lunan

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EAst CoAst oIL & GAs

THE SUPPLY SHIP WELLSERVICER, UNDER CONTRACT TO HUSKY ENERGY, DOCKED IN ST. JOHN'S.

SUNNY, WITH A CHANCE OF RAIN

Statoil has new discoveries, Hebron is underway, but future of offshore exploration may still be cloudy

By Wes Reid

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EAst CoAst oIL & GAs

age [as] the source rocks . It is very much similar when you look at how the traps are formed and how they actually look and work .”

These attributes, as well as Newfoundland and Labrador’s seas and climate, probably give Statoil an edge on its East Coast oilpatch rivals, because, as Richardson notes, “We have a lot of experience from the Norwegian Shelf, which we can use on the offshore area of Newfoundland, and we’re doing that . The physical environment we work in is also very comparable to the Norwegian Sea and the Bering Sea, which are sub-Arctic areas that we have worked in for 30, 40 years, so that is our strength, and we are using that to the best of our advantage .”

Success for Statoil Mizzen, drilled in late 2008 and announced as a discovery the following spring, contains approximately 200 million barrels of light, sweet crude . In late September, Statoil revealed that Bay du Nord held an estimated 300 million to 600 million barrels of light crude .

Harpoon has been declared a discovery, but is still being evaluated .

The Bay du Nord results are particularly exciting for Statoil, and definitely open the door for additional work .

“With only a few wells drilled in a large licensed area, totalling about 8,500 square kilometres, more work is required,” says Tim Dodson, Statoil’s executive vice-president, exploration . “This will involve new seismic, as well as additional exploration and appraisal drilling to confirm these estimates before the partnership can decide on an optimal development solution in this frontier basin .”

Richardson describes them as three different finds, but says more work must be done to determine a development strategy or whether such a plan is even in the cards .

PHOTO: HUSKY ENERGY INC.

MIGHT THERE BE A CLOUD IN THAT silver lining seen as Newfoundland and Labrador’s petroleum sector prospects?

A short-term view of the situation would cause one to answer no to that question .

The bigger picture, though, comes with a most important caveat . And it concerns exploration .

This, however, doesn’t obscure the reality that Newfoundland and Labrador has been on an economic roll for several years and the trend, primarily as a result of the province’s robust offshore oilpatch, may continue well into the future .

Statoil Canada Ltd .’s offshore exploration pursuits there provide ample evidence of that .

On the phone from his office in Calgary, Statoil Canada exploration vice-president Geir Richardson says, “If we believe there is significant potential in an area and that it also contains what we call high-impact prospects, then it is often prioritized .

Offshore Newfoundland is one of those places and it has now become a core area for us in exploration .”

The firm and its partner, Husky Energy Inc .—with a 35 per cent stake in the project—have an astonishing 100 per cent success rate of discovery with a three-well program undertaken in the Flemish Pass using the semi-submersible rig West Aquarius .

In waters more than 1,100 metres deep, some 500 kilometres east of St . John’s, the three discoveries, at Mizzen, Harpoon and Bay du Nord, are within 20 kilometres of each other .

According to Richardson, their geology shares characteristics a lot like those of formations in the Norwegian Shelf .

“In many respects it is quite similar,” he says . “It is the same age [as] the [Norwegian Shelf] reservoir rocks . It is the same general

EXPLORATION

Dunderdale said earlier this year while addressing an international petroleum conference hosted by the Newfoundland & Labrador Oil & Gas Industries Association (Noia) .

More than $36 billion in major capital spending is being planned or is underway in the province, with a significant chunk of that— about $14 billion—being spent by ExxonMobil Canada Ltd . and its partners to develop the 700-million-barrel Hebron-Ben Nevis field in the Jeanne d’Arc Basin on the Grand Banks .

“They are separate, individual structures which will have separate SDLs [significant discovery licences],” says Richardson . “If we do come to a development discussion—and we’re not there now—but if that happens, we have to address the best scenario to create value from this .”

Statoil could determine by year’s end how much crude the discoveries hold .

Richardson says, “When we come back with the volumes on these discoveries, as soon as we have those clarified later this year…we will need to do appraisal drilling of these discoveries .”

The Flemish Pass is part of Iceberg Alley . One of the roughest, coldest, most dangerous patches of ocean on the planet, it is often home to menacing, mountain-sized icebergs .

Fortunately for Statoil, bergs have passed through the Flemish Pass without interfering with the drilling program .

“So far that hasn’t played a role in our operations, but we are always prepared, of course, if that happens,” says Richardson .

The offshore petroleum industry is the largest contributor to Newfoundland and Labrador’s gross domestic product (GDP), at 33 per cent, with oil production valued at more than $8 billion and royalty revenues of $2 billion in 2012 .

According to the Conference Board of Canada, the province will lead the country with a six per cent rise in GDP through 2013, while 2014 will see 3 .4 per cent growth .

During 2013, major projects, mostly focused on the offshore, will contribute an estimated $9 .4 billion to the provincial economy, a 10 per cent increase over 2012 .

“We are experiencing a great momentum right now in Newfoundland and Labrador’s oil and gas industry,” Premier Kathy

Hebron taking shape Centrepiece of the project is a gravity base structure (GBS) currently under construction at the Bull Arm fabrication facility on Trinity Bay in eastern Newfoundland . The structure, with 1 .2 million barrels of storage capacity, should be on site by late 2017, when production of an estimated 150,000 barrels per day is expected to begin .

The year 2017 won’t arrive too soon for ExxonMobil: the biggest publicly traded oil and gas company in the world has suffered through five consecutive quarters of falling production, and is counting on Hebron and other developments in the Gulf of Mexico and offshore Africa to reverse that trend .

Kiewit-Kvaerner Contractors (a partnership of Peter Kiewit Infrastructure Co . and Kvaerner Newfoundland Ltd .) landed the $1 .5-billion contract to engineer and build the Hebron GBS . Work at Bull Arm began earlier this year and is on schedule, with peak construction requiring 3,500 workers .

Newfoundland and Labrador will receive $23 billion in royalties and taxes from its 4 .9 per cent Hebron stake over the project’s 30year lifespan .

“This is a strategically important project for us, and we believe it confirms our strong position within Arctic technologies in general, and gravity base structures in particular,” says Bjørn Gundersen, Kvaerner’s executive vice-president responsible for concrete structures .

Kvaerner and Peter Kiewit Infrastructure have a long history of working together: they put together the topside facilities for the SeaRose, which is the floating production, storage and offloading vessel Husky Energy uses to produce its White Rose field . Since White Rose (which has three satellite fields) produced first oil in 2005, it has seen considerable expansion .

“Initial development from the White Rose field commenced in 2005,” says Husky’s senior communications specialist for the Atlantic region, Colleen McConnell . “Since then, we have tied back additional production from nearby satellite fields North Amethyst [in 2010] and West White Rose [in 2011] .” A fourth water injection well was brought online at North Amethyst in August, and the field’s first multilateral production well is being drilled .

“When White Rose was first sanctioned in 2002, it was based on a recoverable resource base of 200 [million] to 250 million barrels,” says McConnell . “We now expect to produce more than double this amount through the various satellite extensions .”

In June, the third satellite field, South White Rose Extension (SWRX), received regulatory approval for a development plan amendment .

Husky is targeting 20 million barrels of oil from that property and the amendment allows the company to access an additional 6 .5 million barrels of incremental production from the South Avalon Terrace at the southern tip of the main White Rose field .

Once developed, SWRX will deliver oil via subsea tie-back to the SeaRose .

Gas injection was installed this summer, and production equipment will be installed next summer .

“That will give us capacity to commence gas injection in late 2013 and oil production in late 2014,” says McConnell .

N ov E m b E R 2 0 1 3 O I LW E E K s u p p L E m E N t

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EXPLORATION

— Tom Marshall, natural resources minister, Newfoundland and Labrador

Technip Canada Ltd . is carrying out the work, budgeted at $1 .2 billion, using the diving support vessel Wellservicer and pipe-laying vessels Apache II and Deep Pioneer .

“A new drill centre will access an estimated 24 million barrels of crude from SWRX itself and further incremental production from the southern portion of the main White Rose field,” McConnell says .

Another project underway involves the White Rose H-70 well that Husky is drilling northwest of the main field as part of a nearfield delineation program .

The company has not confirmed anything, but it may build a GBS wellhead platform at Argentia for the West White Rose Extension .

Newfoundland and Labrador’s environment department approved the project last summer .

Argentia is a Placentia Bay community with a huge ice-free harbour that acted as a strategic U .S . naval base . The nearby town of Placentia, which incorporates Argentia, recently sold Husky a work permit for $2 .25 million, conditional on the company going ahead with work on the wellhead platform .

Placentia mayor Bill Hogan retired last September, but he remains active in business and is confident that Husky will go ahead with the venture .

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Not all sunshine Times are mighty good and looking better for the Rock, but even with the confidence brought by new projects, there remains a caveat attached to exploration activity .

Industry has invested $1 .2 billion in exploration work commitments for 2013 and there are 38 active exploration licences in place—encouraging news for the province’s offshore petroleum play . The problem is, Newfoundland and Labrador is past its peak crude production .

Hibernia (1 .24 billion barrels of reserves), Terra Nova (419 million barrels) and White Rose (400 million) are the province’s three productive oilfields . Total production from the three averaged 197,000 barrels per day last year, down from 266,000 barrels per day in 2011, and while shutdowns and repairs contributed to some of the decline, the fact remains the three fields are now past their prime .

The waning output of these reservoirs and the fact that Hebron won’t start pumping until late 2017 could leave the

PHOTO: GOVERNMENT OF NEWFOUNDLAND AND LABRADOR

THERE ARE A NUMBER OF LARGE OIL COMPANIES THAT ARE NOT REPRESENTED IN OUR OFFSHORE, AND WE WOULD LIKE TO ATTRACT THEM HERE. WE ARE GETTING THREE TO FOUR EXPLORATORY WELLS A YEAR AND WE WOULD LIKE TO SEE MORE.

“

“

He says, via telephone from his home, “Husky is here for the long term . Initially, when they were in tax negotiations with the town, they wanted a deal that would take them up to 2040, and I understand they have expressed an interest to the landowners for that site until 2040 .”

Hogan also believes service and supply sector businesses are about to set up in Argentia .

“As I understand it, it will be the only gated, grading dock on this side of the Atlantic, so equipment that went oversees now can be worked on here in Argentia,” he says . “There’s a couple of other companies that have expressed interest in developing [supply] boat services out of Argentia .”

EXPLORATION

province, its oilpatch and Noia companies in the discovery and development lurch .

“In order, obviously, to have a larger industry and more sustainability into the future, it’s always good to have more players come into the basin,” says Paul Barnes, manager, Atlantic Canada, for the Canadian Association of Petroleum Producers . “Not only does that help with growing and sustaining industry, it provides fresh eyes into reservoir characteristics and other aspects of the offshore here, which may unlock other areas and hopefully more discoveries .”

Complicating matters, there is no guarantee that future searches for hydrocarbons will mirror present endeavours .

Competition Compared with other regions, such as the Gulf of Mexico and the North Sea, Atlantic Canada’s offshore exploration efforts are modest at best, and the region could easily experience a decrease considering the level of competition from other global oil and gas jurisdictions .

“We need exploration and success from that in order to sustain and grow the economy further,” says Newfoundland and Labrador Natural Resources Minister Tom Marshall .

All is not lost, though—far from it when factoring in recent government initiatives to create greater exploration in offshore Newfoundland and Labrador .

One of those initiatives saw Dunderdale and Marshall among a trade delegation in China last June showcasing the province’s resource wealth .

They were trying to entice that nation’s state-owned Sinopec Group and China National Offshore Oil Company to invest in Newfoundland and Labrador’s oilpatch .

“These petroleum companies have prioritized Canada as key to their growth plans and expressed great interest in Newfoundland and Labrador and our resource potential,” says Dunderdale, who led the delegation . “The companies have agreed to follow up with officials from the department of natural resources and Nalcor Energy [Newfoundland’s Crown energy company] to undertake further discussions and to exchange information .”

Earlier this year, Nalcor identified three immense, potentially hydrocarbon-rich basins off the coast of Labrador . It’s compiling data about the basins and the rest of the Newfoundland and Labrador offshore and will make those findings to prospective players in the East Coast offshore .

“There are a number of large oil companies that are not represented in our offshore, and we would like to attract them here,” says Marshall . “We are getting three to four exploratory wells a year and we would like to see more .”

Nalcor’s investments and other government spending in geoscience are expected to lower barriers and reduce financial risks associated with exploring for hydrocarbons in offshore Newfoundland and Labrador .

“It’s extremely important to us that we attract other players to our offshore,” Dunderdale says . “We’re talking about a different land tenure regime where we put up smaller blocks of land where we have more companies bidding .”

When taking these strategies into account along with the fact that about 90 per cent of Newfoundland and Labrador’s enormous offshore territory—twice the size of the Gulf of Mexico—has yet to be explored, the province’s oil and gas prospects could not seem rosier, caveats aside .

N ov E m b E R 2 0 1 3 O I LW E E K s u p p L E m E N t

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LESLEY JAMES IS THE CHEVRON CHAIR IN PETROLEUM ENGINEERING AT NEWFOUNDLAND AND LABRADOR'S MEMORIAL UNIVERSITY.

Memorial University’s Chevron Chair is leading the way to enhanced recovery in the offshore

WITH MANY OF THE WORLD’S OILFIELDS in decline, operators and governments alike are looking for ways to maximize recovery rates .

The amount of oil recovered from conventional fields typically varies from 20–40 per cent . Oil recovery rates in heavy oil fields average 10 per cent, while the Norwegian continental shelf has an average recovery of 47 per cent .

With this in mind, industry, government and academia in Newfoundland and Labrador are partnering to expand research and development capacity aimed at strengthening petroleum research capacity, including recovery rates .

A key element to maximizing recovery is the development and implementation of enhanced oil recovery (EOR) techniques . EOR for conventional oil refers to any of several techniques that make it possible to recover more oil than can be obtained by primary production (natural pressure drawdown) and secondary recovery (typically waterflood or gasflood) . At this point the oil is not in one continuous phase, making incremental recovery complex

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and challenging . The goal of EOR is to recover the waterflood or gasflood residual oil by injecting fluid(s) to alter the fluid-fluid or fluid-rock properties to assist in reconnecting and mobilizing the oil toward the production well .

Lesley James has been the Chevron Chair in Petroleum Engineering at Memorial University since the position was created in December 2011 . Established as part of a five-year, $1-million partnership between Chevron Canada Limited, the Research & Development Corporation of Newfoundland and Labrador, and Memorial University, the position aims to strengthen the capacity for petroleum engineering research in the Faculty of Engineering and Applied Science .

James brings to the position a research focus on sustainable oil production by increasing oil recovery rates through EOR .

“I was really comfortable and excited by this idea and trying to research and develop ways to increase recovery and sustainability of our offshore fields,” James says .

PHOTOS: DAVE HOWELLS/RDC, MEMORIAL UNIVERSITY

MAX DRIVE

ENHANCED RECOVERY

THAT WE CAN PLAY WITH TO GAIN

“

“

THERE ARE A LOT OF CO2 PROPERTIES

A BETTER UNDERSTANDING. — Lesley James, Chevron Chair in Petroleum Engineering, Memorial University

She notes that EOR is very field specific . First, the type of rocks (including properties such as permeability, porosity, wettability, homogeneity and heterogeneity), geological setting and geologic characteristics are considered . On the fluids side, the API and actual composition of the oil must be assessed in terms of factors such as the oil’s viscosity, the depth at which it occurs, reservoir pressure and temperature, and where the gas/oil contact and water/oil contact occur . Researchers then have to consider the type of fluid to inject and how that interacts with the oil itself at those particular conditions in that particular rock .

This new area of research for Newfoundland and Labrador’s offshore has been enhanced by the investment of $11 .8 million in laboratory equipment and research by Hibernia Management and Development Company Ltd . The new laboratory equipment will be used to examine various EOR techniques specific to Newfoundland’s offshore . The state-of-the-art lab is currently under construction at the Bruneau Centre for Research and Innovation at Memorial University, with anticipated completion this fall .

James is excited about the work that she and her team are undertaking .

“Essentially, we’ll be able to study fluid-fluid and fluid-rock interactions at reservoir conditions,” she explains . “We’ll be able to do core flooding experiments where we can try any number of EOR techniques at the core scale using real reservoir rock, and then play with those operating parameters and what we’re injecting, etc ., to look at recovery .”

One of the key parameters is miscibility, or the ability of the injected fluid and the oil to mix .

SHERVIN AYAZI (LEFT) AND MOHAMMADREZA KOWSARI ARE PROJECT ENGINEERS WORKING IN THE HIBERNIA EOR LABORATORY AT MEMORIAL UNIVERSITY.

“If you can achieve miscibility between the fluid that you’re injecting and the oil, then recovery efficiency can increase,” she says, noting that an EOR method being investigated for Hibernia is called water alternating gas .

“We’ll actually have some rock from Hibernia, and we’ll saturate it with oil and we’ll then look at changing the parameters to see how recovery changes . So if we inject this much water and this much gas, or if the gas was this composition versus that

N ov E m b E R 2 0 1 3 O I LW E E K s u p p L E m E N t

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ENHANCED RECOVERY

“

IF WE CAN FIGURE OUT WAYS THAT WILL ULTIMATELY RECOVER MORE OIL FOR THE PROVINCE, THEN I THINK THAT WOULD BE A SATISFYING JOB.

“

— Lesley James, Chevron Chair in Petroleum Engineering, Memorial University

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composition, what does that do to the percentage recovery that we can actually achieve?”

James and her team are also conducting research funded by Petroleum Research Newfoundland & Labrador to look at CO2-based EOR .

“Again, the idea is to make it as meaningful as possible for offshore Newfoundland, albeit CO2 probably wouldn’t be a fluid of choice to use offshore Newfoundland,” she says . “But there are a lot of CO2 properties that we can play with to gain a better understanding .”

This work involves a set of visualization experiments where a glass reservoir is constructed and flooded with oil and then exposed to varied operating conditions, such as different pressures and injection rates, to look at recovery . James says this type of experiment is very beneficial .

“We can actually see the pore-level recovery or the porescale recovery, so you can see where oil is left behind and how it is trapped, and what conditions you need to actually access that oil again .”

Although EOR research is very field specific, James says research and development from other jurisdictions is also beneficial .

“At this point, I’m really drawing on the fundamental science side of things, as well as industry best practices and whatever information is available on how to develop an EOR program for a particular field,” she says . “The research and development side of enhanced recovery is not only making it work for your field looking at the field specifics, but actually looking at the fundamental science and trying to better that recovery from a pore-scale point of view, to displacement efficiency, to field efficiency .”

James expects that her current research team will be busy for the next few years . She says the faculty is hoping to extend its core group to create a petroleum research centre, which will extend to other parts of the oil cycle .

“If we can figure out ways that will ultimately recover more oil for the province, then I think that would be a satisfying job .”

Reprinted with permission from Noia News, 2013 – Q2 (Spring) issue.

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LABRADOR

territory Uncharted

pHoto: pAuL tEARLE/pHotos.Com

Nalcor’s January announcement opens new frontiers

NALCOR ENERGY’S EARLY STAGE exploration work with partners TGS-NOPEC Geophysical Company and Norwegian company Petroleum Geo-Services (PGS) is paying off—discovering a trio of new, potentially oil-prone offshore basins in the deeper waters off Labrador that merit further exploration .

For the past two years, the partnership—dubbed MKI—has acquired more than half of the planned 42,000 kilometres of 2-D seismic survey data in the Labrador Sea and on the Northeast Newfoundland Slope, which includes the Orphan Basin, Flemish Pass and the Jeanne d’Arc Basin . It’s an area roughly the same size as the U .S . Gulf of Mexico .

The survey data has helped to redefine the basin configuration off Labrador, delineating the Chidley Basin, Holton Basin and Henley Basin . Each basin has a namesake cape or harbour in Labrador . As well, the survey data has helped to redefine the Hawke Basin, which was once thought to extend further south .

“This effectively increases the known offshore Labrador basin acreage by over 100 per cent,” Ed Martin, president and chief executive officer of Nalcor, told Noia’s annual general meeting in January .

Martin said many of the structures imaged in the new basins are encouraging because they are very large and significant compared to other global basins . Further analysis is being done

to understand the reservoir quality, hydrocarbon content and seal capacity—key items in whether or not oil and gas companies decide to drill once a basin has been identified .

“Any time old theories are successfully challenged and new models created, industry takes notice . Basins that contain structures with the potential to hold hydrocarbons are what the global exploration companies are looking for, and need, to put the drill bit in the water,” he said . “While scientific analysis will help . . . reduce the pre-drill uncertainty, we ultimately won’t know what any structure holds until that structure is drilled .”

Nalcor has also been discussing the survey data with oil and gas companies that are not yet active in Newfoundland and Labrador .

Martin didn’t identify those companies, but he said they expressed strong interest in the survey findings .

“We are very encouraged because they are very interested .”

Nalcor is working to attract more explorers to the Newfoundland and Labrador offshore by fostering the right environment for future developments . While the province has the fiscal certainty and regulatory stability necessary for sustained exploration activity, it also needs improvement in two key areas: being competitive with other offshore oil and gas jurisdictions and having plenty of prospectivity .

N ov E m b E R 2 0 1 3 O I LW E E K s u p p L E m E N t

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LABRADOR

Saglek Henley

Chidley

Hopedale

LABRADOR

Holton

LABRADOR

NEWFOUNDLAND

Hawke

Orphan

souRCE:NALCoR ENERGY

NEWFOUNDLAND

Nalcor Energy, working with TGS-NOPEC Geophysical Company and Petroleum Geo-Services of Norway on an extensive seismic survey (left) along the coast of Labrador and offshore Newfoundland, has identified three new oil-prone basins, Chidley, Henley and Holton.

The survey enlarged the known offshore Labrador basin by more than 100 per cent.

“The prospectivity of a region is central to its ability to attract investment in the offshore,” Martin said . “The region as a whole needs to be competitive to vie for the limited exploration resources and capital of global E&P [exploration and production] companies .

Such competition will unquestionably drive more investment .”

While the Jeanne d’Arc Basin is home to three producing oilfields, the Hebron project and a number of other discoveries, more than 20 other Newfoundland and Labrador basins remain under explored compared with other offshore jurisdictions, such as the United Kingdom and Norway .

“Most of the exploration opportunity in these under-explored basins in our region exists in slope and deepwater areas,” Martin noted .

Around the world, Martin said investment in deepwater exploration is currently at record levels . International research firm Wood Mackenzie reports that $55 billion was spent on offshore oil and gas exploration in 2012—and 64 per cent of it was spent in deepwater exploration .

Wood Mackenzie also reports that Newfoundland and Labrador is one of the “10 most highly prospective offshore regions” in the world . Yet the province attracted just one to two per cent of global exploration spending .

“This, despite historic drilling success rates and vast, underexplored areas,” said Martin . “We believe that with the right strategy, the province can capture a significantly larger share of global exploration activity—ultimately leading to the discovery of new resources for the benefit of the people of the province .”

To develop that strategy, the province and Nalcor reviewed the best practices of other state-owned energy companies and tailored them to Newfoundland and Labrador . Nalcor is also investing in new frontier seismic data acquisition, such as the ongoing 2-D survey .

“We believe that new exploration activity will ultimately lead to the discovery of new commercial resources,” Martin told 14

EAst CoAst oIL & GAs

conference delegates . “We are focused on front-end exploration cycle investments in new data to unlock the potential that our undeveloped frontier basins may hold .”

The strategy includes reducing barriers to exploration, such as the lack of high-quality, readily accessible geoscience data .

Martin said more than 75 per cent of the province’s seismic data is 25 years old—meaning the data format is out of date and little of it covers slope and deepwater basins .

Nalcor set out to rank the province’s basins for prospects, identify gaps in geoscience knowledge and find ways to close those gaps . One step was the 2010 oil seeps project in which Nalcor partnered with Astrium, an EADS company, to obtain satellite images of the province’s entire offshore area to detect new sources of oil .

The oil seeps project data was used to target areas for the 2-D surveys with TGS and PGS . That survey has helped to uncover new basins off Labrador, where more than fi ve trillion cubic feet of natural gas was discovered in the Hopedale and Saglek basins during the 1970s and early 1980s . Martin said the area was thought to be gas-prone and that areas further offshore in deeper water were believed to have “no prospectivity .”

By extending the seismic surveys to deeper waters off Labrador and to areas where oil seeps had been detected, he said the partners discovered more basins that have the potential to “differ significantly” from the gas-prone basins already discovered off Labrador .

“It is absolutely critical to note and understand that a marine depositional package has the potential to be more oil prone than gas prone should it contain source rock material,” he said .

Reprinted with permission from Noia News, 2013 – Q1 (Winter) issue

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