BEYOND THE HORIZON

Harvey Smith
President
Hibernia Management and
Development Company

Pioneering a new frontier

Pioneers in a new frontier. That's how we at Hibernia like to describe ourselves. After all, Hibernia is the first oil field to be developed off the east coast of Canada.

In many ways, we are leading the development of a new offshore oil and gas province for Canada. Even though we are the first field to be operating in the area, we certainly won't be the last. According to the government body formed to oversee developments offshore Newfoundland, the Jeanne d'Arc basin in which the Hibernia field is located, contains a total of 16 oil fields.

Recoverable reserve estimates are believed to be 1.6 billion bbl of oil, 8 tcf of gas, and 360 million bbl of natural gas liquids. Development is expected soon on several other fields, such as Terra Nova, Hebron-Ben Nevis, and Whiterose, all of which are located relatively close to Hibernia.

Of these 16 fields, Hibernia is the largest. Located 315 km east-southeast of St. John's, Newfoundland, it contains approximately 3 billion bbl of oil in place, of which 615 million bbl are presently estimated to be recoverable. Reserves are found in two principal sandstone formations - Hibernia and Avalon - at average depths of 3,700 meters and 2,400 meters respectively.

Delineation drilling in the early 1980's provided high quality information on the Hibernia reservoir. The reservoir contains about 1.3 billion bbl of oil, with 515 million bbl estimated to be recoverable. Data offered little insight into the complex stratigraphy of the Avalon Reservoir, which has approximately 2 billion bbl of oil in-place.

For this reason, current estimates only call for 100 million bbl of recoverable reserves, which translates to a recovery factor of 5%. This reservoir contains significant upside potential and efforts will be made to increase recoverable reserve estimates early in the new millenium.

Huge reservoir

Being the pioneer operator on the Grand Banks offers the Hibernia owners a competitive advantage in developing this new oil and gas province. The Hibernia platform is massive.

It stands roughly half the height of the Empire State Building
It weighs in excess of 1.2 million tons
It has the ability to store 1.3 million barrels of oil
It has a design production capacity of 150,000 bbl a day.

Once the platform is producing at capacity rates, initiatives to increase throughput will be examined. The design features of the platform present many opportunities. Once production rates from the Hibernia field begin to decline, marginal fields near the Hibernia platform can be tied in. Early operators in the North Sea have generated significant revenue by following similar strategies.

Hibernia's position as the pioneer development also generates opportunities onshore. Hibernia has invested significant capital to develop the infrastructure required to support its offshore operations. As new operators enter the Grand Banks, they too will require these services.

Shore infrastructure

Sharing services and infrastructure will lower costs for both parties and is a win-win strategy. Hibernia has already experienced some initial successes in this area. Helicopter services and satellite communications were shared between Hibernia and Amoco, who drilled an exploration well in late 1997.

Probably the greatest opportunity Hibernia has for influencing the development of this industry is through its performance, which since 1994 has been excellent. Every major construction milestone was met on schedule and within budget. Since the platform was installed offshore in June of 1997, all milestones have been reached significantly ahead of schedule and the operation continues to remain on budget.

The first two wells were spudded more than two weeks ahead of schedule, which left the Hibernia organization well positioned to beat its target for first oil. More time was gained during drilling and first oil was produced a full four weeks ahead of schedule.

This first well proved to be quite special. It produced oil at a greater rate than any other well in Canada, with production consistently flowing from the well at 40,000 b/d. A second well came on stream in early December and produced at 20,000 b/d. This will be the average flow rate for most typical Hibernia wells.

Although a third well has since been completed, and a fourth well is nearing completion, production is expected to decline over the next several months until the first water and gas injector wells can be completed. Production will then increase and stabilize for the next few years. Plateau production is expected to be achieved in 1999.

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