Natural resources news from Atlantic Canada

Answering the call
Play Fairway Analysis credited with $970-million offshore N.S. exploration commitment

An almost $1-billion bid for offshore oil exploration rights in Nova Scotia has sparked hope the province’s stuttering industry could come to life.

Shell Canada has agreed to pay $970 million for the rights to explore four offshore parcels over the next six to nine years. The Canada-Nova Scotia Offshore Petroleum Board last made such a call in 2009 – and didn’t receive a single bid.

Shell’s bid, announced in January, is the largest in Atlantic Canadian history and dwarfs other recent activity. Since 1999, Marathon drilled its exploratory Crimson Well and Encana & Marauder also drilled a couple of exploration wells. The C-NSOPB would not say if other companies had made bids this time.

Barbara Pike, executive director of the Maritime Energy Association (formerly OTANS), said it was great news for the industry. “In the big picture, it renews interest in offshore Nova Scotia. The fact that these are record-breaking bids on offshore parcels means that they are serious about drilling some wells,” she said. “There has not been another call for bids offshore eastern Canada – offshore Canada – that has had these numbers.”

Shell has an exploration license to drill off the Scotia Shelf in water ranging in depth from 1,400 to 3,700 metres. The bids required bidders to have experience drilling exploration wells in water depths greater than 800 metres in the past 10 years. The C-NSOPB said Shell’s track record in deep water helped its bid.

“Shell demonstrated that it has extensive worldwide experience in deepwater drilling, including involvement in three previous deepwater exploratory wells drilled offshore Nova Scotia and Newfoundland,” the C-NSOPB said in its report.

The work can start March 1, if it gets approval at the federal and provincial levels. Nova Scotia Premier Darrell Dexter has already offered his public support. Shell is required to post a 25 per cent deposit before it starts.

Stuart Pinks, CEO of the C-NSOPB, said the exploration will happen in locations already highlighted as having potential. “These lands are located offshore Southwest Nova Scotia where recent studies have identified oil potential. It is also important for our community to know that we have a regulatory regime in place which serves to ensure that petroleum activities are only conducted by competent parties in a manner which holds the health and safety of offshore workers and the protection of the offshore environment paramount,” he said. At present, Shell is just looking. If it likes what it sees, it would have the exclusive rights to apply for a significant discovery or production licence to one or more of the sites. It must do that within the first six years of the deal. If it drills in that six-year period, the remaining three years of the deal are activated.

“The only way they can have legal title to that petroleum is if they have a production licence,” explains Tanya Taylor White, spokeswoman for the C-NSOPB.

Four other parcels offered at the same time didn’t receive any bids. The next call for bids will be issued in May.

Pike said the massive Shell bid will catch the attention of the other giants. “The buzz that I hear is this bid has really woken up the industry,” she said. “When you have a super-major like Shell bidding $970 million, even in that circle, that’s a lot of money.”

The provincial government in part credited the revival of interest in the offshore industry to the $15-million petroleum atlas it has developed. The 350-page Play Fairway Analysis took three years to create and shows which areas are most likely to contain resources. It’s an “evergreen” document, meaning it is regularly updated.

Pike agreed it was a big factor. “It really was able to provide, by an independent analysis by some of the world-leading experts, the theory that there is oil offshore Nova Scotia,” she said. “It’s why Shell was attracted.”

By Jon Tattrie

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