How do you keep an offshore exploration licence as it nears expiration? Diligently pursue drilling the well, to paraphrase the offshore regulations.
St. John’s-based Canadian Imperial Venture learned this the hard way as it started its $6.5-million, one-well exploration program off the Port au Port Peninsula last Friday.
Just one day before the Jan. 15 expiry date of its west coast exploration licence, the company started drilling the 3K-39 well from Shoal Point, a strip of land jutting into Port au Port Bay.
“The deadline was midnight on the 15th, which was close,” said Steve Millan, president of Canadian Imperial Venture.
“We started late for a whole host of reasons, but we made it in the end.”
If not, the company would likely have still kept its exploration licence.
With a drill rig and crew in place to spud the well, Canadian Imperial Venture and its partners met the offshore rules.
Those rules state, “The exploration licence continues in force while the drilling of that well is being pursued diligently and for so long afterward as may be necessary to determine the existence of a significant discovery based on the results of that well.”
Diligence is the key.
The company keeps the licence “because they are diligently pursuing the well,” said Sean Kelly, spokesman for the Canada-Newfoundland and Labrador Offshore Petroleum Board.
Canadian Imperial Venture and its partners also have six months from the time drilling concludes to apply for a significant discovery licence — if they make a discovery.
“It gives them time to compile the data,” said Kelly.
“Then, we do the evaluation and if we agree, they’ll get a significant discovery licence. If we don’t agree, the licence is surrendered.”
Canadian Imperial Venture estimates it will take 20 to 30 days to drill to a depth of 2,200 metres.
The well has also been designated “tight’’ — meaning the results remain confidential for up to two years from the date drilling concludes, according to offshore rules.
Canadian Imperial Venture and its partners are chasing an unconventional oil-in-shale play based on results of a 2008 exploration well.
“We’re going right beside the 2K-39 well, but the purpose of this well is to gather a lot more geological and engineering information,” said Millan.
To drill the 3K-39 well, the company overcame a number of delays.
Among them, damage to the drill rig as it was being trucked to Newfoundland in the fall, rig repairs and recertification, and then ferry backlogs in the weeks leading up to Christmas.
By Dec. 23, the company warned of another last-minute hurdle — saying it might not meet the drilling deadline because all necessary regulatory approvals had yet to be obtained.
As operator of the well, Alberta drilling company Dragon Lance Management was navigating those regulatory waters.
“This one is perhaps doubly complex because we start onshore and we end up offshore,” said Millan.
“We basically report to two jurisdictions. Now, they’re well co-ordinated, but it does add a little bit of extra effort on everybody’s part.”
Millan said the process is also a little slower for both regulators and companies in the wake of last April’s massive oil spill in the U.S. Gulf of Mexico.
“There’s a lot more review and surveillance and so on. It just takes a big effort,” he said. “No company wants to get itself in the position that BP got itself into.”