Nalcor has released what they are calling encouraging seismic results offshore Labrador and is busy promoting them to global oil companies in an effort to inspire new offshore exploration activity as production from older fields in the country’s youngest province begins to dwindle. Satellite imagery that reveals naturally occurring oil slicks in the water—suggesting the presence of crude deposits under the sea bed—is also part of their promotional package.
While company executives caution that interested companies will still have to drill exploration wells before anyone knows with any certainty whether there are commercial pools of oil to be tapped under the icy Labrador Sea, Nalcor has assembled the initial scientific information and made it available to interested parties. The win for the province occurs when Nalcor invests in a partnership if, when, a project moves toward production.
Jim Keating, vice-president of Nalcor Energy Oil and Gas, is optimistic. “Some people out there would say, ‘some of the biggest oil companies in the world have been active offshore for 30, 40 years. Surely if there is anything there to find they would have found it by now. Whatever we have is whatever we have.’ Well, that’s the glass halfempty notion,” he begins.
What’s the glass half-full notion? “If we’re only 10 per cent successful (in future exploration), then we get all of what this province has and is enjoying now, as it relates to oil and gas, again… That in and of itself is exciting enough to make us want to continue,” he says.
SEISMIC: better targeting, lower costs
Richard Wright is Nalcor’s exploration manager. He explains that this province has numerous offshore basins, any of which could have sedimentary-type rocks containing oil and gas deposits. “The North Sea is a very prolific production area, one of the world’s most prolific areas in terms of oil and gas potential between the U.K., Norway and the Netherlands. That whole area, in terms of size, would fit into an area that we have (offshore) but the only place with commercial discoveries right now is in the Jeanne d’Arc Basin.” In other words, the “massive” area left unexplored could potentially hold oil and gas deposits.
But “digging” or drilling isn’t where it’s at anymore. Cost, for one thing, is prohibitive. It’s also what Keating calls a “putting all the eggs in one basket,” approach.
Nalcor has instead invested in numerous projects, costing more than $20 million by the end of 2013, aimed at getting a clearer picture of the province’s offshore resource potential using science. They then make that data available, for a cost, to potential investors.
One project uses seismic data. “We think of seismic data as an X-ray or an MRI of the earth… By doing that surveying first, you get an idea of what those (sub-sea) structures look like. Do you have basins? If you have basins, are there areas where oil and gas can accumulate? And so seismic data becomes the primary data input to your exploration strategy… It’s a first cut, before you drill,” Wright explains.
For benchmarking purposes, Nalcor looked at seismic data from other oil rich countries, like Norway. They found there was a very strong correlation between the amount of seismic data acquired and the number of wells drilled in an area. Makes sense, says Wright. “You’re going out, you’re imaging the earth, you’re finding targets to drill, you’re putting together a story based on geological history, and basically informing through science where to best drill to get a discovery.”
EXPLORATION: Exploration science improves the odds
Using science has everything to do with attracting investors, who in turn may do further exploration. “If you were an oil and gas company and you had a limited, fixed staff of explorationists and someone came to you and said, ‘well, boss, we’ve got to decide where we’re going to invest our time to determine where we’re going to drill our next wells.’ And I came to you and I represented a region like Africa or the North Sea or the Gulf of Mexico and I said, ‘I’ve got a great opportunity (for you) to see data, brand new data, shot with the best equipment, processed with the latest software, and I can put my staff on it right away’ versus, ‘well, I’m representing a team that’s starting to look at the east coast of Canada and I don’t have any new data, I have old data, and I can maybe get my hands on it.’ Who is going to get the money to go forward?” asks Keating.
It’s all about lowering barriers, he continues. This province competes for investment with oil and gas companies from all over the world. “The least we can do is make a level playing field so these explorationists have access to the same quality of data and volume of data that they would get in other places. That’s one of the first things we’re trying to achieve.”
Wright expands on Nalcor’s role in the development cycle: “We get the early data that says if we have a basin that potentially contains oil and gas. We answer some of those early questions, and we say, this is where oil and gas may be. Someone may want to drill here.” Having current, state-of-the-art data in the hands of the Crown corporation allows it to actively market this province’s offshore to oil companies.
That’s Nalcor’s “value-add,” says Keating. “Nalcor can spend money in a modest way, to really de-risk the front end. That’s a role we see states play all over the world, and state oil companies play all over the world. They get the data. We get the data,” he says. It’s a win-win, he stresses.
More importantly, when it costs so much to drill a well, you don’t want to hinge your whole future, particularly the future of a province, on one or two companies that may have a budget for three or four wells.
While 2-D seismic work is a huge part of Nalcor’s science strategy, it’s only good if the other data they have supports their findings. “It’s better to have a few basic pieces of information that collaborate well than to have one. So, I have seismic that shows characteristics of something leaking, moving to the top, and I’ve got this satellite image that has a high confidence of oil seep. Put that together, we won’t say for certain that (we have oil) but you go from a 10 per cent confidence that that could be what it is to maybe something like 75 or 80 per cent and that sometimes is good enough to help someone make a decision, an economic decision, on what to do,” said Keating.
ROI: research investment pays off
Nalcor’s investment in seismic data is already paying off, says Keating, particularly when it comes to some of the data coming out of Labrador.
“What we found are some very, very, very interesting, attractive, significant basins, which the information is telling us are oil prone, not gas prone, which is a big deal because all we’ve found prior in this region is gas-based,” said Keating.
“We can clearly say something is there but only a drill bit will tell whether oil is there. We have identified significant new prospective basins that are on a very, very large scale in some cases.”
Some $35-billion (U.S.) was spent globally on deep-water exploration in 2012, with Newfoundland and Labrador accounting for only one to two per cent of that. By making Nalcor’s seismic information broadly available, officials hope to increase that percentage. Several oil companies have expressed “keen interest” in these new opportunities in Labrador.
This is a sign that investing in the science of exploration has been the right move, says Keating.
“We attract investors. If you are an oil and gas investor, then you make your decision based on risk. And the cost of getting… the scientific information we have is very low when compared to the cost of a well. Science has helped reduce the risk. Drilling is no longer the first step. Science is.”