Regulator commended for changes by Nalcor Energy vice-president
Representatives for companies active in the oil industry offshore Newfoundland and Labrador are diving into the details released earlier today on the province’s new land sale system.
The EC 225 flies by the West Aquarius oil rig anchored in the waters of Conception Bay.
In addition to more scheduled land sales, the new system will require a minimum bid on exploration licences of $10 million — a significant increase over the existing $1 million minimum.
“Most of the offshore licences go for way more than that anyway,” commented Paul Barnes with the Canadian Association of Petroleum Producers (CAPP) in Atlantic Canada, when asked about the dollar figure.
Barnes said the change may end up as an issue for smaller companies, like the companies looking to work off of the province’s west coast, but said it is not a concern for the major players in the offshore.
Meanwhile, CAPP is generally pleased with news of the changes in the land sale system. “There was nothing in there that was really concerning to us. We support the efforts to make the system more predictable,” Barnes said.
The Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) is responsible for offshore land sales — essentially an auctioning of exploration licences. Earlier today, it released the details of the new process.
The new system divides the province’s offshore into high, medium and low-activity areas, placing land sales on four-year, two-year and one-year cycles as required. Length of time will correspond to the activity in an area, since more active areas will have more information readily available for companies to purchase and obtain through partnership agreements.
Areas with a longer lead time for final bids will be frontier areas, like off of the Labrador coast, where oil companies will need more time to gather information.
“You need to give that area a lot of warm up time,” said Jim Keating, vice-president of Nalcor Energy and lead at the Crown corporation’s oil and gas division.
The time is crucial to allow companies unfamiliar with the region a chance to consider bidding, according to supporters of the land tenure change.
Bidding on land sales has a direct connection to activity in the offshore, since the bids are commitments for work on the exploration licences. Companies put down cash with the CNLOPB as part of the process and forfeit that money if they do not live up to their commitments.
For oil companies, taking on the risk of committing at least 10 million dollars to explore an offshore area comes more easily when they know some basic information about the geology and potential in the area for an actual oil and gas discovery.
Keating said the division of the province’s offshore into high, medium and low-activity areas is not unusual when you look at other offshore land sale systems around the world. Other systems have alternatively described offshore regions as mature, emerging and frontier.
The changes in this province’s land sale system are subject to approval by the provincial and federal ministers of Natural Resources.
That said, provincial minister Derrick Dalley has already publicly endorsed the changes.
“The introduction of a scheduled land tenure system in Newfoundland and Labrador will expand the timeframe for seismic acquisition and help to attract exploration interest from new operators in the province’s offshore. The new system will benefit all participants including government, seismic contractors, operators, the regulator and most importantly, the people of Newfoundland and Labrador who reap the dividends of responsible resource development,” stated provincial Minister of Natural Resources Derrick Dalley, in a statement issued this afternoon.
(Update posted 2:30 p.m.)