Shoal Point Energy and Canadian Imperial Venture Corp. (CIVC) have an oil target on the province’s west coast, a drill rig en route and a tight deadline.
The partners outlined a $4.5-million, one-well drilling program on the Port au Port Peninsula at CIVC’s annual shareholder meeting Thursday in St. John’s.
The total cost of the project will be $6.5 million, including geological studies and meeting regulatory and environmental requirements.
The companies aim to start drilling by late November or early December — as soon as the rig arrives from the mainland.
To drill the well, St. John’s-based CIVC and Calgary-based Shoal Point Energy sold a portion of their stakes in the exploration property to an Alberta drilling company, Dragon Lance Management Corp.
“We financed this one somewhat unconventionally,” George Langdon, CEO of Shoal Point Energy.
“Our drilling partner’s actually paying for the well.”
Langdon isn’t setting a date to spud the well, but estimates it will take about three weeks to drill.
On Thursday, Dragon Lance sent word to CIVC the rig was damaged while trucking it to the province.
“It will have to be repaired and recertified, but we’re pretty confident we’re going to make that deadline,” said Steve Millan, president and CEO of CIVC.
The deadline facing the partners is Jan. 15, 2011 — that’s when the second term of their offshore exploration licence expires.
Known as EL 1070, it was issued by the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB).
Although the licence covers the seabed adjacent to the Port au Port Peninsula, horizontal drilling will take place onshore at Shoal Point.
It’s a narrow strip of land jutting out into Port au Port Bay, dividing it into east and west.
The discovery well drilled in 2008 — known as 2K-39 — extended into the western side of the bay and toward the Green Point formation.
The new well — dubbed 3K-39 — will head in the same direction.
Millan told CIVC shareholders an independent assessment estimates 5.2 billion barrels of oil in place at the Green Point formation.
The new well will firm up potential reserves and determine how much oil could be economically produced.
“You need to have 90-per-cent certainty and you need to know it’s producable with existing technology,” Millan said.
“We should be able to establish at least minimal reserves.
“One well won’t prove up the whole bay … but it will supply enough confidence in the resource that raising money will be a lot easier, or possibly bringing in large partners will be a lot easier.”
He said any drilling success will depend on good geology, foresight and luck.
The partners are applying to the CNLOPB for a significant discovery licence.
“It’s going to be based on this well,” Langdon said.
“We’re actually in the process now of preparing that application, and we’ll supplement it with information from the well once it’s drilled. We’ll put our best geologic case forward.”
Both companies describe their 2008 discovery as an unconventional oil-in-shale play.
Langdon said producing oil from shale rock is similar to producing natural gas from shale using hydraulic fracturing.
Known as fracking, water and chemicals are pumped into the ground at high pressure to crack the rock and produce the natural gas.
“They’re doing liquids, too,” Langdon said. “From everything I’ve read we can almost, as effectively, from very, very small … spaces between the grains produce oil as well as gas. That’s a very exciting thing for us.”