Statoil snags land in Flemish Pass

Moira Baird
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Oil and gas company adds new discovery licence to its offshore collection

Hege Rogno, vice-president of East Coast with Statoil, provides an update on her company as she addresses delegates attending the 2010 Newfoundland and Labrador Oil & Gas Industries Association (NOIA) conference in St. John's recently. She said Thursday the company is considering its next move regarding offshore land parcels.

Statoil Canada bid $96.4 million for the rights to three parcels of offshore land in the deepwater Flemish Pass about 500 kilometres off Newfoundland and Labrador.

Included in those parcels is a significant discovery licence bought by Statoil for $1.2 million in cash.

It’s the first time a significant discovery licence has been offered for bids since the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) started holding land sales in 1988.

The small significant discovery licence (SDL) — just 3,700 hectares in size — borders the Mizzen discovery made last year by Statoil in water depths of 1,100 metres.

Hege Rogno, vice-president of East Coast offshore upstream for Statoil in St. John’s, said the company is considering its next move.

“We’ll take our time evaluating the land,” she said.

“We’ve been saying for the last year or so that we’re evaluating the potential of offshore Newfoundland and our ambition is to become a producing operator.”

Exploration land

Statoil also won the rights to explore 327,000 hectares of seabed in the Flemish Pass.

The company and minority partner Repsol E&P Canada bid more than $75 million in exploration work commitments for the largest of the two parcels.

That parcel is north of Statoil’s Flemish Pass SDLs — and it’s in much deeper water. There, water depths range from 2,500 metres to 2,900 metres.

“We will be acquiring seismic there in the northern portion within one to two years,” said Rogno.

“Then, we will do the normal steps — evaluate the seismic, evaluate the potential in the area and then finally from that decide if we want to drill.”

Statoil has six years to make that decision.

Drilling a well would extend the term of its exploration licence to the full nine years.

Statoil has experience in other deepwater oil and gas fields in the Gulf of Mexico and off the coast of its native Norway.

“One of our areas that we want to specialize in is deepwater development,” said Rogno.

For the rights to explore the second parcel, Statoil and minority partner Husky Energy bid just over $20 million. It completely surrounds the two SDLs Statoil has in the area.

Jeanne d’Arc basin

Last month, Husky Energy and its partners successfully bid $16.3 million for the exploration rights to two offshore parcels in the oil-producing Jeanne d’Arc basin. Combined with Thursday’s bids, this year’s land sales total $112.7 million.

Natural Resources Minister Kathy Dunderdale said it’s a strong indicator of the health of the province’s offshore oil industry.

“The amount of expenditure commitment associated with these bids is the highest we have seen in a number of years,” she said in a Thursday release.

“It is encouraging to see that operators which have recently become involved in our offshore have continued their presence and formed new partnerships and that interest also continues in the prolific Jeanne d’Arc basin.”

Bidding rules

The minimum bid in the Flemish Pass is $1 million.

The highest bidder receives an exploration licence for up to nine years — and must drill a well to keep the licence for the full term.

Since 2006, SDLs have been subject to rental fees that escalate over time.

Those fees will apply to Statoil’s newest SDL in the Flemish Pass.

In 2004, the CNLOPB estimated the Flemish Pass contained about 1.7 billion barrels worth of oil.

Organizations: Statoil, Canada-Newfoundland and Labrador Offshore Petroleum Board, SDL Husky Energy

Geographic location: Flemish Pass, East Coast, Newfoundland Gulf of Mexico Norway

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