Without a single offshore oil discovery, Greenland has captured the attention of dozens of the world’s largest oil companies, many of which are already making huge investments in the area.
It has also grabbed the imagination of major players in Newfoundland and Labrador’s oil and gas industry. The exchange of harsh environment expertise between the two regions is an obvious opportunity for both. But given the province’s location – due south of Greenland – Bob Cadigan, president of the Newfoundland and Labrador Oil and Gas Industries Association, sees another: “Hopefully we can get the supply chain operating directly out of St. John’s.”
With Husky Energy slated to drill offshore Greenland in 2013, in a program the company will manage from St. John’s, Cadigan expects that supply chain may be very close to getting its first trial run.
Supplying offshore Greenland would help position the province’s capital as the go-to hub for future projects offshore Canada and elsewhere. An Arctic gateway, so to speak.
“We see ourselves and the Greenland piece as the first step in getting a foothold into supplying oil and gas in the eastern Arctic Circle,” says Cadigan. “We’ve got a lot of expertise in ice. And once they come here to get that expertise we’ve got to try to round it out with other services that we can supply.”
Jim Keating, vice president of Nalcor Energy Oil and Gas (Newfoundland and Labrador’s crown-owned energy cor- poration) shares Cadigan’s enthusiasm. Fresh from his latest trip to Greenland, Keating has a ready list of areas in which he believes Nalcor and Nunaoil (Greenland’s state-run oil company) can work together, including seismic and data collection projects, promotion, education, and professional exchange.
“We have production, demonstrated capability, and 15 years of activity here which they are preparing to do,” says Keating.
“So they’d like to learn from us: how did you structure, how did you prepare, what did you do to get your children interested in science and technology and engineering, right up to what are your economies of scale to providing service and supply to Greenland.”
Of course, every good partnership must go two ways. On the flip side, Newfoundland and Labrador could stand to learn a few things from the Greenland way of doing things, as evidenced by a 2010 land sale off the country’s west coast. This land sale first turned heads at Nalcor towards Greenland.
“What was remarkable to us early on was the level of interest in West Greenland. There’s no discoveries there . . . but a tremendous amount of international interest,” says Richard Wright, Nalcor Energy Oil and Gas’s manager of exploration.
At the time, Nalcor was working out how to attract global interest in land sales offshore Newfoundland and Labrador. Why did more than a dozen international oil companies apply to be the operator of land offshore Greenland – while a land sale in the less remote, less harsh Canadian offshore would only pull in two or three bids?
It came down to information and promotion.
“By telegraphing they were going to have a land sale a few years down the road, that allowed data companies to come in and acquire seismic data, seismic seep data . . . By demonstrating there is significant potential in this region, and then offering the land sale, they brought the world to their door.”
Lessons from the Greenland experience could be applied in Nalcor’s efforts to “demystify and de-risk” the Newfoundland and Labrador offshore.
“We want to lower the barriers. Make it accessible,” says Keating. “Give the (oil companies) as much information as we can . . . It’s all about making sure the data is packaged and presented to the right people at the right time.”
Similarities between the province and Greenland abound, from historical culture to modern-day issues like out-migration and the struggle with the fisheries. When it comes to oil and gas, Keating says royalty structures and regulations are compatible. It all makes for a solid foundation for partnerships, he continues, hinting of formalized agreements to come over the next few months.
“Now is the time,” he says. “Newfoundland and Labrador companies, or anyone at all interested in serving in a marine environment, should look at Greenland and be interested.
“You don’t want to wait until that discovery, because everything is going to flood in pretty quick. Now’s the time to make your relationships.”
C-Core, Provincial Airlines, Cougar Helicopters and Miller Shipping are just a few companies from Canada’s east coast already engaged in Greenland activities.
In early February, at the Northern Lights 2012 Business and Cultural Showcase in Ottawa, Provincial Airlines and Air Greenland announced a Memorandum of Understanding. The MOU is the first step in an agreement through which each airline will provide passenger and cargo air service between Canada and Greenland.
An efficient transportation link addresses one key challenge to Newfoundland-Greenland cooperation: travelers must currently route through Europe, generally resulting in a multi-day trip.
About that elusive Greenland oil discovery? No one expresses any doubt that it will come – and when it does, that it will be transformative.
“The Greenlanders persevere and they’re persistent folks, just like we were in the 1970s and 1980s,” says Keating. “You may hear of companies going in and drilling a couple of wells, and you get dry holes, and people’s hopes start to wane – but 33 wells were drilled in the Grand Banks alone before Hibernia was discovered. Well-trained geologists will find that oil . . . they will eventually have a commercial discovery.”
The price of oil, which has remained high, even in the face of recession, has “made a business case” for the pursuit of Arctic oil. Advances in technology are making it a reality.
Exploration offshore Greenland will have an effect on development in offshore Labrador and elsewhere in the Canadian north, Keating says. Good news in one location most certainly means good news for others.
This latter point is key. Although Newfoundland and Labrador agencies are eager to be part of the excitement and development of Greenland’s offshore industry, it is in no way because their interest in their own back yard has waned.
“We haven’t finished at home, not even by a long shot,” says Wright. In spite of public perceptions about passing peak production, “we think we’re just at the beginning stages of finding out what our resource potential is here.”
NOIA’s Cadigan agrees. He lists Chevron and Statoil’s $350-million exploration commitment in the Flemish Pass; Chevron’s plans to drill in the Orphan Basin in summer 2012; and the exploration wells being drilled in the Jeanne D’Arc Basin. There’s still interest off Newfoundland’s west coast and in the 4.2 trillion cubic feet of natural gas reserves offshore Labrador.
Cadigan brings the discussion full circle. “In the end, the more activity that occurs out of St. John’s for oil and gas supply, the more competitive we become,” he says. “The more competitive we become, the cheaper offshore exploration becomes. The cheaper that becomes . . . it’s a real positive in terms of our future.”
Keating takes a broader view: “They’re our neighbours, they’re right across the border. There is lots we can do. It might not seem concrete to us right now, what the end benefit is. And in many ways it doesn’t matter. We know that there’s a common desire for both countries to strengthen where we live.
“We see an alignment of purpose, and alignment of intent, and alignment of knowledge.”