Newfoundland’s oilfield discoveries — decades old now — kickstarted the economy
Drill Ship Discoverer Seven Seas. — File photo
First in a three-part series
St. John’s harbour was a rig spotter’s paradise in the 1970s and 1980s — the era of the Hibernia, Terra Nova, White Rose and Hebron oilfield discoveries off Newfoundland and Labrador.
Rigs and drill ships often passed through The Narrows to take on supplies, equipment and spare parts in port before heading to the Grand Banks or the Labrador Sea to drill exploration wells.
Rigs such as the Glomar Atlantic, Sedco 710, Bow Drill 3, Sedco 706, Pelican, Ben Ocean Lancer and Petrel drilled discoveries and dry wells known as dusters.
It was the heyday of the province’s offshore oil and gas exploration.
It was a busy time for the Harvey Offshore supply base in St. John’s.
“At its peak, we had 380 employees,” said Adrian Coady, who worked with Harvey Offshore at the time.
“We ran a labour contracting business and we worked for most of the drilling contractors and a lot of the supply boat companies.”
Three drillships usually worked during the ice-free season off Labrador, another trio of semi-submersible rigs drilled wells on the Grand Banks including the ill-fated Ocean Ranger, and three or four rigs were busy off Nova Scotia.
Since those early days Harvey Offshore has expanded, invested millions in new piers and continues to be shore base for the producing oilfields, drillers and supply boats.
These days, Coady is president of Offshore Recruiting Services Inc., a company he founded in 1997. Its clients include offshore drilling contractors, marine construction ships and seismic vessels working internationally, off Canada’s East Coast and in the Arctic.
“We learned a lot,” said Coady. “Now, we work all over the world.”
P.F. Collins’ ties to the offshore oil industry date back to the mid-1960s when seismic ships surveyed the seabed, bouncing sound waves off the ocean floor to map possible oil and gas structures under the ground.
In the early 1970s, Amoco Canada drilled more than 30 wells south of the Jeanne d’Arc basin that is home to the province’s three producing oilfields.
“Mostly all dusters,” said Tanny Collins, president of P.F. Collins.
“At the same time, Mobil was drilling a number of wells … they had a suite of rigs called the Sedco I, Sedco J, Sedco H. Those were built in Halifax.”
P.F. Collins specializes in customs brokerage, logistics, the movement of goods, warehousing and distributing equipment for ships and drill rigs.
“What was so different about that period was the amount of seismic activity and the numbers of companies that were here doing seismic,” Collins said.
Those surveys are the first step in exploration drilling.
Some of surveys were done “on spec” — meaning a seismic company collects the data in the hopes of selling it later to oil and gas companies.
“There was a fair amount of activity, as far as seismic was concerned, up until the early ’90s,” said Collins.
By the latter half of the ’70s, he said, exploration drilling picked up again — thanks to the Hibernia discovery well drilled in 1979.
“Then you had a whole host of explorers come in with the Hibernia discovery,” Collins said.
Exploration and delineation drilling peaked off Newfoundland and Labrador during the 1980s.
It was the era of the petroleum incentive program — better known as PIP grants.
These federal subsidies covered up to 80 per cent of exploration spending in frontier areas by companies that were three-quarters Canadian owned. Foreign companies were reimbursed for 25 per cent of their drilling costs.
Kevin Roche, general manager of Noble Drilling Canada in St. John’s, said PIP grants generated plenty of exploration energy.
“What was so different about that period was the amount of seismic activity and the numbers of companies that were here doing seismic." Tanny Collins
“We haven’t seen the likes of that since.
“All the U.S. companies were pretty anxious to get up here then, because it was kind of seen as the new frontier.”
Noble crews the two drill rigs aboard the Hibernia platform.
Roche spent seven years working in the Beaufort Sea before returning to Newfoundland in 1984.
“When I got here … there was probably five or six drilling units here.”
By 1989, when Roche left the province again, there were none.
“We went from five or six active rigs to no rigs. That was the big downturn … the whole industry kind of collapsed.”
The PIP grants were gone, and oil prices had tanked in the mid-’80s, averaging less than US$20 per barrel.
Introduced in 1981, PIP grants were supposed to secure energy self-sufficiency for Canada in the wake of escalating oil prices in the 1970s.
They were part of the Trudeau government’s National Energy Program.
That program — hated in Western Canada — spurred offshore exploration off Eastern Canada, in the Beaufort Sea and the Arctic.
By the time the drilling subsidies ended in 1986, Ottawa had paid out almost $2 billion in PIP grants for exploration work off Newfoundland and Labrador, according to 2003 provincial budget documents.
Three of the four major oil discoveries on the Grand Banks came during the PIP era.
PIP grants spurred $3.1 billion worth of exploration spending in the 1980s compared to $448 million in the 1970s.
“It meant that operators with high levels Canadian content could claim significant recoveries on money spent to build rigs and drill wells,” said Coady.
PIP grants also led to rig-building at Canadian shipyards and the development of ice-class drill rigs and support ships capable of the working in the Arctic.
“There’s a lot of significant Canadian technology unique to Canada that was developed because of the money we spent in the Arctic doing exploration,” said Coady.
He said some of that equipment wound up working in other harsh-environment oil and gas areas, such as the Barents Sea or the Sakhalin Sea off Russia’s east coast.
Bob Cadigan, president and CEO of NOIA, describes PIP grants as the driving force behind many of the local industry’s 145 exploration wells.
Those numbers pale compared to the approximately 4,000 exploration wells drilled in the U.K. and Norwegian sectors of the North Sea that have seen many more oil and gas discoveries.
The Newfoundland and Labrador Oil and Gas Industries Association (NOIA) represents 500 offshore service and supply companies in the province.
“A majority of the discoveries in Newfoundland and Labrador’s offshore, Nova Scotia and even the Arctic Islands … were all made during this period.
“Obviously, incentives work in terms of enticing explorers to look at more remote, frontier basins.”
Since the PIP grant era ended, Cadigan said exploration drilling has been sporadic.
And the pace of exploration has also slowed significantly in the past two decades as oil and gas companies turned their attention to oilfield development and production.
“A good year would be a couple of wells,” said Cadigan.
“The reality of it is, when you’re drilling as infrequently as we are, then it really slows the pace of development of our resources.”
Saturday: Exploration in decline