Gary Park

Petroleum News Calgary Correspondent

Exploration plans dating back almost 40 years are stirring to life again now that the Canadian government has agreed to convert old permits to new exploration licenses in the Laurentian sub-basin, opening the door to a whole new exploration basin off the East Coast.

Natural Resources Minister John Efford said May 4 that the Canada-Newfoundland Offshore Petroleum Board will issue eight new licenses to the ConocoPhillips/Murphy oil partnership and Imperial Oil for the sub-basin, which covers about 15,000 square miles.

The Geological Survey of Canada has estimated the Laurentian contains 600-700 million barrels of oil and 6 trillion cubic feet of gas, based on exploration in the 1960s. Other projections have gone as high as 1 billion barrels of oil and 10 tcf of gas.

The new exploration licenses, covering about 6.2 million acres, required ConocoPhillips to spend about C$40 million on exploration, including C$23 million spent under the old permits. Imperial has a C$1.5 million commitment on the remaining license.

Pending final approval from Newfoundland’s Natural Resources Minister Ed Byrne, the two permit-holders will get five-year licenses, with options for an additional four years depending on drilling commitments.

ConocoPhillips will do seismic first
Bob Spring, vice president of exploration for ConocoPhillips, told Petroleum News that his company will be moving “fairly slowly,” completing two phases of seismic before deciding whether to drill.

“It’s a rank wildcat basin, so there will be no snap decisions,” he said.

Spring said applications have been submitted to conduct several hundred miles of 2-D seismic that will help ConocoPhillips focus on where to conduct its 3-D work.

New federal environmental regulations introduced last year also present an obstacle to be cleared.

Because the schedule is “awful tight there is not a high likelihood” of any work starting this summer, Spring said.

ConocoPhillips holds an average 70 percent of the licenses it has in partnership with Murphy, but Spring expects that if the exploration stage proceeds his company will be on the lookout for other participants.

He said ConocoPhillips hopes the Laurentian is an extension of the gas play offshore Nova Scotia. On the basis of the early data, there is optimism that the “gas kitchen” could hold in the range of 6 to 10 tcf.

But Spring said there is no evidence on the oil side to support the Geological Survey of Canada’s estimate of 600-700 million barrels.

Spring said the ConocoPhillips licenses are in water depths of about 4,900-8,200 feet, with the gas prospects about 10,000 feet below mud line.

Imperial has no immediate plans to explore
Imperial, while welcoming the new licenses, has no immediate plans to explore its single license in the Laurentian.

The sub-basin was stirred back to life two years ago when a 14-year offshore boundary dispute between Newfoundland and Nova Scotia was settled by arbitrators who awarded 78.5 percent to Newfoundland, 12 percent to Nova Scotia and 19.5 percent to the Saint Pierre and Miquelon islands, owned by France.

From 1969 to 1971, the Canadian government issued permits covering almost 8 million acres. With ExxonMobil as operator, ConocoPhillips participated in the Bandol exploratory well in French waters in 2001, which was deemed a dry hole.

Meanwhile, Efford announced at Houston’s offshore technology conference that the government will lift import duties on offshore drilling rigs and reduce government red tape in a bid to attract increased exploration to a region hit by drilling failures and the withdrawal of major players.

He said removing the duties, which average about C$50,000 a day, will “increase the competitiveness” of the Canadian offshore and also encourage rig owners to have repairs and maintenance done in Nova Scotia and Newfoundland.

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