Implications of development 500 kilometres from shore being considered
The announcement of 300 million to 600 million barrels of oil at Statoil’s Bay du Nord prospect was hailed Thursday as “significant,” “massive” and “a game changer” for the province’s oil and gas industry.
A map of Statoil finds in the Flemish Pass Basin, which include the Bay du Nord Mizzen and Harpoon prospects located about 500 kilometers from St. John’s. — Photo supplied by Statoil
“This isn’t just a big discovery by Newfoundland standards. This is a fairly large discovery by international standards,” said Bob Cadigan, president of Noia, the St. John's-based oil and gas industries association.
“It’ll put the eyes of the world on us, from a prospectivity standpoint.”
However, the Bay du Nord prospect, the nearby Mizzen prospect and Harpoon, are all located in the Flemish Pass Basin, about 500 kilometres from St. John’s.
It is about 150 kilometres further from shore than the province’s producing projects, around the Jeanne d’Arc Basin.
“It is exciting that Statoil is opening a new basin offshore Newfoundland,” said Tim Dodson, Statoil’s executive vice-president of exploration, in a statement issued as part of the announcement of the estimated size of the Bay du Nord find.
“This brings us one step closer to becoming a producing operator in the area,” he said.
The distance from shore will have to be considered as the numbers are crunched.
From St. John’s to the exploration area in the Flemish Pass is about the same as what lies between Aberdeen, Scotland, and Stavanger, Norway.
“It’s not exactly a hop, skip and a jump from the shore,” acknowledged Asim Ghosh, president and CEO of Husky Energy, a partner with Statoil in the Flemish Pass work.
He said oil discoveries in the Flemish Pass are well positioned, however, with “great market access” in relation to the United States and Europe.
Noia’s Cadigan, meanwhile, said the supply and service community has been able to effectively deal with the distance to date, likewise with exploration work in the similarly-distanced Orphan Basin.
“While it complicates logistics, and potentially adds some additional cost, it isn’t an issue that’s insurmountable,” he said.
The find at Bay du Nord is considered by Statoil to be “above the economic threshold” for development, but years of further exploration and assessment work will be required before an oil development might be proposed. Seismic testing and drilling is being planned, but has yet to be scheduled.
“One of the criticisms we’ve heard is we’ve only got proven oil in one basin. Now we’ve put an end to that. And now we know — it’s now proven — there’s oil in the province’s deepwater basins also,” said Natural Resources Minister Tom Marshall, when asked about the Flemish Pass news.
The Canada-Newfoundland and Labrador Offshore Petroleum Board has been acting as regulator for work in the Flemish Pass to date and there is no sign that will change. Yet, Marshall acknowledged, in the case of an oil development in the Flemish Pass, the financial side of things may become somewhat complicated.
“We’ve got control up to the 200-mile limit and then, beyond that, it’s governed by the United Nations in terms of payment of either a fee or oil,” he said.
“But Canada, along with a number of other countries, have given notice of intent to apply to the UN to extend their jurisdiction to the edge of the continental shelf, and that will be proceeding.”
Marshall said he believes the discoveries in the Flemish Pass will be added atop the discovery of new basins off Labrador, new seismic data from Nalcor Energy and a push for more scheduled land sales, to draw new explorers to the province — a requirement for sustaining the offshore oil and gas industry into the future.