Offshore activity has been relatively steady in recent years offshore Newfoundland and Labrador, and the Province is working to see that it continues.

Minister Shawn Skinner, Department of Natural Resources, Government of Newfoundland and Labrador, acknowledges that times have been good but believes it is important to lay the groundwork for future investment. “What we’re trying to do here is accelerate exploration activity,” he said. “We need to get out and do something in terms of exploration to continue to attract investors.”

With the producing fields depleted by nearly 70%, it is imperative to find and develop additional reserves. “There are places of opportunity offshore Newfoundland and Labrador,” Skinner said. “We know they’re out there. As we see production levels decline, we are working to ramp up new projects.”

The heavy-oil Hebron development in the Jeanne d’Arc Basin is the next in line, Skinner said, noting that significant construction work for the project is being carried out locally. Contracts have been let for the topsides and the gravity-based structure, and much of the services and supply work will be done from within Newfoundland and Labrador.

The Skandi Vega anchor-handling vessel pulls alongside the deepwater semisubmersible rig Henry Goodrich as the rig prepares to move to the Mizzen field. (Image courtesy of Statoil)

Max Ruelokke, chairman and CEO of the Canada–Newfoundland and Labrador Offshore Petroleum Board (CNLOPB), said the ball is now rolling on Hebron.

“The Hebron project is moving through its development phase,” he said, noting that the completeness review of the development plan application was finalized in August and forwarded to Commissioner Miller Ayre, who has been tasked with carrying out an independent review that will be conducted in parallel to a review being done by the CNLOPB. Ruelokke said this process is expected to conclude early in 2012.

Meanwhile, another public review is under way for a proposed exploration well in the Gulf of St. Lawrence. “It’s been a fairly busy time,” he said.

Paul Barnes, manager, Atlantic Canada for the Canadian Association of Petroleum Producers (CAPP), is in agreement that momentum must be maintained in the offshore oil and gas industry.

“We want to grow the business and to sustain it into the future,” Barnes said, noting “the best way to do that is to look at areas that can help us in the Arctic, look at small fields and how they can be tied back and developed, and look into advances that will enhance processes such as pipeline trenching.”

For Barnes, the questions that remain are: “How can we get more oil and gas out of the ground?” and “How can we sustain the industry into the future?”

These are some of the very questions being addressed by research activities for which funds are being allocated by Petroleum Research Atlantic Canada (PRAC).

According to Dave Finn, PRAC COO, the organization is looking into four major focus areas for technology development. “Arctic and harsh environment and ice management and trenching – which is a huge challenge for the industry, – are our initial focus areas,” he said “The other two are improving recovery from the three producing fields on the Grand Banks, and HSE issues.”

PRAC, which is funded in large part by contributions from the five operators in the region – ExxonMobil, Statoil, Chevron, Husky Energy, and Suncor – is tasked with helping the companies meet their increased spending obligation and deliver projects that have business value and relevance.

“You can obviously just spend money,” Finn said, “but we’re trying to link R&D investment to business priorities. We’re looking for collaborative opportunities.”

With the help of operators eager to develop capability in the region, PRAC will allocate CDN $400 to $700 million in technology development over the next 15 years.

The three producing fields offshore Newfoundland and Labrador – Hibernia, Terra Nova, and White Rose – are in the Jeanne d’Arc Basin. (Map courtesy of CNLOPB)

Operator update

According to Mark MacLeod, vice president, Atlantic Canada, Chevron Canada, “Offshore Newfoundland and Labrador is one of Chevron’s four focus areas for our company in Canada.”

Chevron is a non-operating joint venturer in two of the three producing fields offshore Newfoundland and Labrador – Hibernia and Terra Nova – and in the Hebron project, which is being developed.

“From an exploration perspective, Chevron Canada has commenced the activities required to be in a position to drill a third Orphan Basin exploration well in 2012,” MacLeod said, explaining that a final decision on drilling a third well remains subject to regulatory and co-venturer approval. Previously, as operator, Chevron drilled the Great Barasway F-66 well in 2006/2007 and the Lona O-55 well in 2010. “In the coming weeks, the key initial activities will include preparing to mobilize a team to St. John’s and starting to prepare key regulatory applications,” he said.

Meanwhile, Chevron is laying the groundwork for additional activity, recently completing a 2-D/3-D regional seismic survey in the North Grand Banks region.

“This regional seismic survey will increase our understanding and knowledge of prospectivity of the area and will help inform our future exploration activity in the region,” MacLeod said.

In February 2010, Chevron partnered with Memorial University of Newfoundland (MUN) and the Research & Development Corp. of Newfoundland and Labrador (RDC) to build a Process Engineering Design and Research Laboratory on campus. At that time, MacLeod announced that Chevron had selected MUN to join its University Partnership Program, which includes approximately 100 schools worldwide, noting that MUN would be the first university in Canada selected for this program. In December 2010, Chevron Canada Ltd. again partnered with RDC and MUN in a $1 million partnership to fund the Chevron Chair in Petroleum Engineering.

ExxonMobil has been active in Atlantic Canada for decades. In addition to being lead owner on Hibernia, the first producing offshore field, and holding interest in Terra Nova, ExxonMobil will operate the Hebron field, which is scheduled to come onstream in 2017. The company also has deepwater acreage in the Orphan Basin.

Meg O’Neill, president, ExxonMobil Canada, talked about the company’s plans at the annual Newfoundland Offshore Industries Association (NOIA) conference in St. John’s, Newfoundland and Labrador, in mid-June.

“This an exciting place to be,” O’Neill said. “There is a lot going on, and the oil and gas industry is very much at the center of this activity.”

One of ExxonMobil’s recent investments is in gas lift technology that will increase production on Hibernia. The modules, which are being constructed locally, are to be installed this year, with project startup planned for 2012. “It’s a $200 million investment that will result in incremental volumes of production with a solid return for all parties,” O’Neill said, noting that the offshore loading systems also are being replaced on the field.

Work is ongoing as well on the Hibernia South Extension (HSE), which O’Neill said represents US $1.7 billion in new investment. The first of at least four production wells was spudded in March 2011, ahead of the original plan, which resulted in early production from the HSE unit this year. “Subsea development activities and drilling will continue in 2012 and 2013, with project completion expected in 2014 after water injection is established,” O’Neill said. This development will bring Hibernia’s total recoverable resource to 1.2 Bbbl, “more than double the volumes projected at the time of initial project funding in the mid-1990s.”

Like other operators in the area, ExxonMobil is investing in R&D, what O’Neill refers to as “an ongoing focus on new technology and innovation.”

One noteworthy project is a commitment on behalf of the Hibernia and Terra Nova projects to contribute $12.5 million over five years to help support the establishment of the Centre for Arctic Resource Development, which will complement the work of C-CORE, a separately incorporated research and development corporation of MUN.

Earlier this year Hibernia announced a $2.4 million donation to support the installation of new simulation training equipment at the Fisheries and Marine Institute’s Offshore Safety and Survival Centre.

Statoil also is investing actively in R&D in the region. As Hege Rogn?, vice president, Offshore Upstream, Statoil Canada put it, “R&D and technology development are in the DNA of the company.”

One of the primary areas of interest is in arctic research.

“There is a lot to learn for us as an operating company,” Rogn? said. “In Norway, we have a lot of experience operating in harsh weather and harsh conditions, but what we don’t have is ice.”

Current R&D focus areas include ice management; ice compressive loading; subsea trenching; escape, evacuation, and rescue, and oil spill recovery response. “We would like to learn from the semi-Arctic conditions and to support Arctic research further,” she said.

Toward that end, Statoil is working with PRAC along with other local operators to pursue further projects, Rogn? said, noting that one of the areas Statoil wants to focus on is subsurface R&D. It is critical to understand the subsurface, she said, because that understanding is essential to developing discoveries.

“The research that is happening in Newfoundland and Labrador is something that we actively want to keep supporting,” Rogn? said.

From an E&P standpoint, Statoil is using Transocean’s Henry Goodrich semisubmersible to undertake a drilling program. “Our main projects this year are two exploration wells,” Rogn? said, noting that the company is currently drilling the deepwater Mizzen prospect in the Flemish Pass. “When that well is finished, we move directly to the Southern Jeanne d’Arc and drill another prospect called Fiddlehead.”

The company has contracted WesternGeco to gather a 1,666-sq-km (643-sq-mile) 3-D seismic survey in the Flemish Pass.

Meanwhile, investment continues on Hibernia and Terra Nova, where Statoil is a partner, and in field development programs on HSE and Hebron.

To date, Statoil has invested in offshore developments as a minority partner and in exploration programs as an operator, but the company is hoping to move to produc- tion operations in the future.

“Long-term, our ambition here in Newfoundland and the Province is to become a producing operator,” Rogn? said. “It takes quite some time to move from exploration acreage to go through the steps of being a producing operator, but that’s what we’re working toward.”

Husky Energy achieved operating partner status more than a decade ago as operator of the White Rose field. Paul McCloskey, vice president, Atlantic Region, Husky Energy, said Atlantic Canada is one of Husky’s pillars of growth. “This region continues to be a key focus area for the company with significant future development and exploration opportunities,” he said.

Husky’s primary focus for 2011 has been executing near-field developments such as North Amethyst and West White Rose. “This has included development drilling at North Amethyst and work on the West White Rose pilot well pair,” McCloskey said.

The operator continues to see good production from the White Rose field and is developing satellite extension fields at North Amethyst and West White Rose.

North Amethyst achieved first production May 31, 2010 and currently has three production wells and three water injectors online. In August 2010, the operator received regulatory approval for a two-well pilot project at West White Rose, which started production Sept. 5, 2011. “The West White Rose pilot well pair will provide dynamic information on the reservoir and help us finalize our full field development plan,” McCloskey said.

At present, the North Amethyst and West White Rose pilot developments are under way, and the company is looking at the feasibility of a concrete gravity-based wellhead platform for future depletion of the White Rose field and satellite extensions. Other plans locally include delineation of the Mizzen deepwater prospect.

Suncor Energy holds a unique position as the only company on the East Coast with interests in all current producing fields – Hibernia (20%) , Terra Nova (operator with 37.675%), and White Rose (27.5%) – as well as HSE, the White Rose Extensions, and the Hebron field (22.73%).

Currently, it is business as usual on Terra Nova, with a turnaround program carried out beginning in September 2011 and plans in place for HS mitigation that will require replacement of some flowlines and risers in 2012.

While Suncor is interested in pursuing exploration drilling for new opportunities, according to Sandy Martin, vice president, East Coast, at present drilling focuses on development of Terra Nova.

Suncor’s recent R&D efforts include a CND $6.8 million investment in partnership with RDC in the Suncor Energy Offshore Research and Development Centre at MUN in February 2011. The 1,090-sq-m (11,733-sq-ft) extension will create significant research space and promote synergy in collaboration among faculty, graduate students, and industry.

The WG Tasman is one of the seismic vessels working offshore Newfoundland and Labrador. (Image courtesy of WesternGeco)

Nova Scotia opens new acreage

Exploration offshore Nova Scotia has slowed considerably in the last few years, but a new play fairway analysis could turn things around.

“Industry has a perception of offshore Nova Scotia as complex geology, gas-prone, limited potential, and a high-cost environment,” said Sandy MacMullin, executive director of Petroleum Resources for the Nova Scotia Department of Energy. “That, in a nutshell, is what we’re up against.”

Fortunately, the results of the $15 million analysis show that is only part of the picture. “The hydrocarbon potential is much greater than what we thought,” Mac-Mullin said. “We’ve got a new and peer-reviewed source rock story, and that story includes an estimated 8 Bbbl of oil potential in addition to 120 Tcf of gas.

“We’ve rationalized why the recent failed exploration wells have failed, and we think that with modern 3-D seismic and new attribute analysis work, you should be able to map the channels into the deep water,” Mac-Mullin said.

“We now believe that the southwest offshore is primarily an oil play. In addition, we have what we call an oil rim – which we believe begins just west of the Sable Island area and extends to the northeast. Basically, the southwest and northeast areas contain significant oil opportunities,” he said. “More than 900 Bbbl of oil equivalent was generated in offshore Nova Scotia over the last 180 million years, and at least 5% of that is trapped.”

Barbara Pike, executive director of the Offshore Technology Association of Nova Scotia, agrees that oil will have to be the target if Nova Scotia is to entice investors. “If we’re going to get companies back drilling offshore, it’s going to be for oil,” she said, “not natural gas.”

The play fairway analysis provides a good look at what the geology looks like offshore, according to Pike. “On the southwest Scotia slope, the play fairway analysis indicates significant oil.”

At present, however, activity offshore Nova Scotia focuses on natural gas development.

Stuart Pinks, CEO of the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB), said gas production from offshore is about to increase. “Canada’s second offshore natural gas project, Deep Panuke, will be coming onstream in 2012,” he said, noting, “There’s been an awful lot of activity over the last couple of years getting ready for that project.” A second pipeline was installed in 2009. And in 2010, operator Encana drilled an acid gas disposal well to receive HS that will be stripped out of the production stream. The company also completed four previously drilled exploration/delineation wells and converted them into production wells last year.

“Right now is a really interesting time offshore Nova Scotia,” Pinks said. “We’ve got production from five fields that will continue on into the latter part of this decade. At the same time that we’ve got additional production coming onstream, we are sensing a renewed interest from a geological perspective offshore Nova Scotia resulting from the play fairway analysis.”

Steve Bigelow, director, Resources and Rights and chief conservation officer at the CNSOPB said the eight blocks that will be up for bid early next year will be attractive to experienced deepwater operators. The parcels are in 950 m to 4,100 m (3,100 ft to 13,500 ft) water depth.

The Henry Goodrich semisubmersible has been contracted to work in Atlantic Canada through a rig-sharing agreement among Statoil, Suncor, and Husky Energy. (Image courtesy of Transocean Inc.)

“At the same time as the call for bids is out there, we’re conducting a Strategic Environmental Assessment,” Bigelow said, which will be made available to potential bidders.

“The bidders will be able to see the lay of the land from an environmental perspective,” Pinks explained. “They’ll know what the environmental sensitivities are and what additional assessments would have to be done as part of their application for authorization to undertake activity offshore.”

The CNSOPB is optimistic that the upcoming bid round will breathe new life into Nova Scotia’s offshore.

“The tide has turned in terms of interest in offshore Nova Scotia,” Pinks said. “We’re seeing a lot of positive indications of companies from around the world. This call for bids will give us a good indication, but we’re hopeful that this is a first step in renewed interest. I think it’s an exciting time.”