arctic climate, ice, spills, pipelines

CAPP R&D dollars could go toward studies that address arctic climate, oil spills in ice, or the movement of oil in arctic areas through pipelines. (Image courtesy of C-CORE)

While US deepwater operations are on hold and shallow-water players sort out new regulations, in Newfoundland and Labrador, it is business as usual.

Projects in the works
According to Paul Barnes, manager, Atlantic Canada, for the Canadian Association of Petroleum Producers (CAPP), “The activity in Newfoundland has been pretty robust and exciting.” Barnes points to the three producing fields in the Jeanne d’Arc Basin in the Grand Banks 196 miles (315 km) east of St. John’s, Newfoundland – Hibernia, Terra Nova, and White Rose – as evidence of the province’s productivity. In addition, he said, there is another project gearing up, the ExxonMobil operated Hebron project, which is in the development stage.

“They’re continuing to staff their offices, and they’re going out to bids for their engineering and procurement front-end engineering contracts,” Barnes said of Exxon. “Those will be awarded later this year, and then we’ll start to see some activity associated with that project as development begins.”

The heavy oil Hebron field holds an estimated 400 to 700 MMbbl of recoverable reserves. It lies in 302 ft (92 m) water depth in the Jeanne d’Arc Basin and at peak production is expected to flow at 150,000 b/d.

The production concept for Hebron is a gravity-based structure (GBS) similar to the one built for Hibernia, the province’s first offshore production facility, which came onstream in 1997.

According to Max Ruelokke, chair and CEO of the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB), Aker Kiewit will build the GBS for the Hebron project. “The GBS structure will be constructed in the province at Bull Arm,” he said, noting, “The engineering will probably be done primarily here as well, as will most of the topsides engineering.” First oil is expected from Hebron before the end of 2017.

Additional development is under way on established fields, including Hibernia, where added reserves are somewhere in the order of 180 to 200 MMbbl, Ruelokke said.

Meanwhile, White Rose West, which will be a tieback to the White Rose Field, is in the regulatory approval process. “There is a fair amount of development activity,” Ruelokke said.

Deepwater and frontiers
“Everybody knows, probably, that the only deepwater exploration wells currently under way in North America are in our jurisdiction,” Ruelokke said.
ExxonMobil drilled the first ultra-deepwater well in the Orphan Basin in 2007. This summer, Chevron contracted with Stena Drilling to supply the Stena Carron drillship to drill the second ultra-deepwater exploration well in the area.

While Chevron is busy on its ultra-deepwater acreage in the Orphan Basin, Statoil is planning another deepwater well in the Flemish Pass.

Active in Atlantic Canada for years, Statoil holds 5% interest in Hibernia, 15% interest in Terra Nova, and today is operating two significant discovery licenses and three exploration licenses offshore.

Over the summer, Statoil carried out a geohazard survey in the Jeanne d’Arc Basin and an appraisal ROV seabed survey on the Mizzen field in the deepwater Flemish Pass. Statoil discovered Mizzen, which lies in 3,609 ft (1,100 m) water depth, in 2009. It has selected Transocean’s Henry Goodrich semisubmersible for its 2011 drilling program, which includes an appraisal well on Mizzen and exploration drilling in the southern Jeanne d’Arc Basin. The company announced its 2011 plans at the annual Newfoundland & Labrador Oil & Gas Industries Association (NOIA) conference.

The Henry Goodrich has been contracted through a rig sharing agreement signed by operators, Husky Energy, Suncor, and Statoil.

According to Bob Cadigan, president and CEO of NOIA, this agreement will keep the rig in Atlantic Canada for an additional three years, with two possible one-year extensions. The contract for Transocean’s GSF Grand Banks semi has been extended for another three years, as well.

seismic survey, Labrador

A new seismic survey is under way offshore Labrador, where five significant discoveries during the 1970s and 1980s identified 4.2 Tcf of natural gas and 123 MMbbl of NGLs. (Image courtesy of the C-NLOPB)

While drilling progresses, Statoil is investing in R&D in Newfoundland and Labrador. In partnership with CAPP R&D taskforce, the company is focusing on arctic and subsurface technologies. The goal of this research, according to Hege Rogno, vice president offshore upstream for Statoil Canada, is to promote Newfoundland arctic R&D capabilities within Statoil and to position the province as global player in arctic R&D through collaboration.

Partnering, Rogno said, brings together oil and gas companies, government partners, the R&D and supply communities, and academia in a collaborative environment that allows collective progress at a faster pace.

Collaborating on R&D
Another of the ways R&D is being advanced is through a relatively new requirement of the C-NLOPB, which obliges producing operators to spend a portion of their production revenue on R&D in the province. “There’s a formula associated with it that’s based on your production volumes and the price of oil,” Barnes explained. “It equates to approximately between C$10 million and $20 million/year to be spent on R&D with the current three production facilities.”

The total amount of R&D money will be quite substantial over the production life of these facilities, which often is 25 years. “It’s a large amount of money for a small province like this to absorb when it comes to R&D,” Barnes said. “What we foresee is a strategy for spending that money wisely here in the province to benefit not only our industry, but to benefit the province, to leave a bit of a legacy after oil and gas is gone.”

Although the R&D has to be conducted in the province, it does not necessarily have to be for the province, Barnes said. Education training also can be considered within that R&D component, although the focus will largely be on research and development.

“We foresee growth in the private sector R&D community as the private sector R&D firms expand their business. We see and anticipate growth within the public university R&D community, as well,” he said.

Ice research changes the playing field
Although Newfoundland and Labrador is rich in natural gas resources, there is no local market at present and no way to produce the offshore reserves and move them to market. There has been a fair amount of investigation over the years into building a pipeline to move gas to shore, but the presence of icebergs has been one of the considerations that has impeded progress.
C-CORE is a major player in conducting R&D to solve the challenges of oil and gas development in regions with ice and icebergs. According to C-CORE president and CEO Charles Randell, several years ago North Atlantic Pipeline Partners were evaluating constructing a pipeline from the Jeanne d’Arc Basin to shore and charging companies to use it, but the question of economics halted the project. Though operators in the basin have shown interest, Randell said, one question continues to be raised: “Is there enough gas out there to make the pipeline economical when you also have to deal with the fact that it’s going through an iceberg area?”
There are many pieces that have to fit into the equation, Randell explained, pointing to the quantity of gas that realistically can be monetized and the price of pipeline construction as two critical pieces. Gas prices are beyond anyone’s control, but science can be brought to bear to resolve some of the construction concerns, particularly in determining the true threat of ice to the proposed pipeline.
“Iceberg scour or gouging has long been a concern,” Randell said, and determining the risk of pipeline damage is a moving target. “That’s one of the things we learned off Labrador,” he said.
A study carried out in 1983 investigated the likelihood of iceberg scour in what appears to be a gas-prone region. “A pipeline with 8 ft (2.5 m) of cover was envisioned” Randell said. “The question to be answered was how often this pipeline would be struck by ice.” Studies undertaken at the time examined the aerial densities and draft distribution of icebergs to estimate the frequency with which an iceberg would hit the bottom. Wellsite survey data were used to estimate the depth of gouging. This analysis indicated the pipeline would be struck three times a year, which was far too often.
For well over a decade, there was no activity offshore Labrador. “In fact,” Randell said, “the bids stopped in 1983 and went to zero for almost twenty years.” Around 2000, C-CORE got involved and undertook analysis of its own, the first step of which was to determine the depth distribution of the scours identified in the earlier research. “This new work showed the scouring depth is not nearly as high as previously thought,” Randell said. With much better data, early analysis by C-CORE indicated that pipeline would be struck, at worst, once every 20 or 30 years. “With renewed interest in Labrador, we were able to do more research, including refinement to the rate of scouring; all leading to improving our understanding of the actual risks. Now, we can show scientifically, technically, and statistically that it would be once every 500 years or so that the pipeline would get struck. And the risk continues to decrease with increased trench depth. Going back, learning more and reducing uncertainty has made a huge difference in projections.”
As science pushes back the “unknowns,” it broadens the scope of possibility for the region and moves the province closer to commercializing its offshore natural gas resources.

Some of the money likely will go toward capitalizing on some of the niche aspects of the community that already exist. “We have a large number of folks within the university who are undertaking arctic-related studies; so that could be expanded to solely focus on petroleum,” Barnes said. Studies could include resource development in arctic climate, oil spills in ice, or the movement of oil in arctic areas through pipelines, for example.

Oceans Advance
Another component of R&D in the province is being facilitated by an organization called Oceans Advance Inc., which is a cluster of 50 local companies that formed a collaborative community to advance technology in 2005.

According to Leslie O’Reilly, executive director of the group, the formation of this cluster cemented relationships among industry, institutions, and R&D with the goal of making St. John’s a center of excellence for ocean technologies.

“Oceans Advance is the mechanism being used to find coalescence for like-minded companies to form a community around oceans technology. We want to cause a resonance in this segment of industry to promote the oceans agenda,” he said.

The collective goal of the Oceans Advance companies is to develop, attract, and retain expertise within their areas of competency; expand and direct research activities to create innovative technologies and new intellectual property; and collectively provide governance that ensures implemented actions achieve the desired and intended results.

“We have to put tremendous emphasis on R&D,” O’Reilly said, “and we have to put programs in place to promote human resource development.”

The objective of Oceans Advance is to solidify the cluster in Newfoundland to more successfully reach out internationally. As that process is under way, the organization also is working locally to encourage young people to consider careers in oceans-related industries.

One of the most significant results of the organization’s efforts, O’Reilly said, is increased interest in oceans technologies among young people in the province. “Enrollment in Memorial University of Newfoundland and Labrador is fantastic,” he said. “There is excitement in the minds of our young people.”

Icebergs, Newfoundland, Labrador

Iceberg scour or gouging has long been a concern for development projects offshore Newfoundland and Labrador. (Image courtesy of C-CORE)

New prospects
One of the most exciting prospects at present, according to Ruelokke, is new exploration offshore Labrador. “There is a seismic survey under way there that hopefully will lead to a well in 2011 or 2012,” he said. Four exploration licenses were awarded two years ago – the first time Labrador exploration licenses were renewed since the C-NLOPB came into existence.

Ruelokke believes the region holds great promise. “We believe that there are large quantities of gas,” he said, pointing to the success rate of the early exploration wells that were done in the late 1970s and early 1980s as part of the reason for his optimism. “Of the first eight wells that were drilled there, five of them were discoveries, which was almost unbelievable when you look at what the standard success rate was, which was about one in 10.”

Discovered hydrocarbons from that activity totaled 4.2 Tcf of natural gas and 123 MMbbl of NGLs.

Geophysical Service Inc. (GSI) invested $23 million to purchase and equip a seismic vessel and to acquire more than 10,000 km of 2-D seismic data in 2004.

In August 2009, the company produced additional geological analysis from integrated seismic, gravity, and magnetic data gathered in the Hopedale Basin offshore Labrador.

More recently, Husky Energy has expanded seismic coverage in the area through a contract with PGS, which will gather a new 2-D seismic survey in the area.

Nova Scotia preps for investors
While Newfoundland and Labrador prepares to move into frontier areas, neighboring Nova Scotia is readying an extensive data package to offer potential investors.

“We’ve faced some challenging times recently,” Energy Minister Bill Estabrooks said. “We don’t have a lot of exploration going on at present, but the province is working diligently to change that.”

Sandy MacMullin, director of the Petroleum Resources Division of the Nova Scotia Department of Energy, explained how the province decided to provide funding. “We had Gaffney Cline conduct a perception survey that defined for us how Big Oil saw Nova Scotia as a place to invest. What we got back is what I thought we would hear, but what I hoped we wouldn’t hear. The risk associated with our geology is gutting our exploration economics. The message was that until we address the geology, we will not get Big Oil to come back.”

The upshot of that realization was the provincial government’s investment two years ago to change the status quo. The $18 million from the province funded a major geoscience and data package program called the Play Fairway Analysis. The objective of the analysis is to improve overall understanding of the basin’s geoscience and make data available to potential investors.

“There is a lot of potential in Nova Scotia’s offshore,” MacMullin said, “The intention when this is done is to put it in the public domain. It will be a very comprehensive assessment of the regions of offshore Nova Scotia that are likely going to be prospective, and it will be available to potential investors.”

Nova Scotia, basin, invested

Nova Scotia has invested C$18 million to fund the Play Fairway Analysis, the objective of which is to improve understanding of the basin so better data can be made available to potential investors.(Image courtesy of the Nova Scotia Ministry of Energy)

Dr. Wayne St-Amour, executive director of Nova Scotia’s Offshore Energy Research Associations, and association staff have been part of the project since its inception. “We need to understand the source rock better,” St-Amour explained. “We need to understand the geology better.” To his thinking, the answer to that challenge is the Play Fairway Analysis, the approach to which he described as “extremely novel.” This type of anaylsis might be undertaken by a supermajor, he said, but the kind of information generated would not find its way into the public domain. “That’s what’s new and different, and the approach that we’ve taken is to assemble seismic data the best we can from commercial sources, but also to collaborate with academic, and consultancy world experts. It’s that mix of expertise that presents a new geological picture for offshore Nova Scotia.”

So far, there has been success in partnering and negotiating for datasets that are owned by data owners in Houston. In addition, the province is working with RPS Energy in Halifax and the UK for technical expertise and France’s Beicip-Franlab, which is integrating the project.

“Beicip-Franlab is taking all of the inputs of the various projects or subcomponent projects and packaging them to create a Play Fairway atlas – maps, gross depositional environments, risk evaluations, yet to find – which will constitute a very comprehensive package of activity.”

A tremendous amount of investment and effort has gone into this project. The challenge now, he said, “is to ensure that the final deliverables portray the science that’s behind them.”

The study results and accompanying data package are to be available in March 2011. Interested exploration firms will be able to test the proposed hydrocarbon models on real data, which should prove useful in evaluating offshore Nova Scotia prospects.

“We have much to offer” Minister Estabrooks said. “We look forward to the world economy rebounding, and we look forward to people from around the world looking at Nova Scotia and considering investing here.” The extensive online data – which Estabrooks calls, “an open invitation to the world” – will no doubt further that cause.

“We are open and ready for business,” Estabrooks said.