E&P wave sweeps Atlantic Canada

“For the past couple of years, we’ve been continuing technical studies that will allow us to pursue Hebron development. In March 2005, Chevron Canada signed a joint operating agreement with partners, Exxon, Petro-Canada, and Norsk Hydro, that establishes the framework for us to move forward,” Bates says.

The most likely development plan will be a gravity-base structure, Bates says, because Chevron will probably use dry trees to process the heavy oil.

“Through better understanding of some of the ice loading and wave action and what some of the impacts will be, we think we can design a GBS that is just as safe, but not as expensive to build as the Hibernia platform,” Bates says.

The development scheme is in the early planning stages.

Though GBS is most likely, there are three other options under consideration, including a tieback to Hibernia, Bates says.

Bates characterizes the project status as pre front-end engineering and design, but says he hopes the resolution of commercial and technical issues will allow the project to move into the FEED phase next year, with first oil expected in 2011 or 2012.

“We’re continuing to look at other areas off the East Coast of Canada,” Bates says.

Petro-Canada has been active in Atlantic Canada since the early days and continues to invest in the region.

“We have interest in all the projects that are going on,” says Bill Fleming, Petro-Canada’s vice president of East Coast operations.

“The two big-ticket items that are exciting for us on the East Coast now are additional drilling on Terra Nova and the progress we’re making on Hebron Ben-Nevis,” Fleming says.

Petro-Canada recently received approval from the Canada-Newfoundland and Labrador offshore petroleum board (CNLOPB) to start development of the Far East section of Terra Nova field,” Fleming says.

Recent approval of an application submitted late last year and updated in the spring allows Petro-Canada to drill in the Far East segment of the Jeanne d’Arc basin, where the company believes there is about 40 MMbbl of recoverable oil. Drilling was scheduled to begin in August 2005.

The development plan is unique for the region, Fleming says, using extended reach drilling. A more powerful top drive on theHenry Goodrich enables it to drill in a wider radius from the existing drill center, which means the Far East wells will be drilled from existing glory holes, he says.

Petro-Canada is also partnering on the Hebron project, which the company hopes will be the next project in the region.

“In April, we signed our joint operating agreement with Exxon Mobil Corp., Norsk Hydro, and Chevron. We’re looking forward to that progressing,” Fleming says.

The regulatory process determines the timeline for Atlantic Canada projects, and that has been a consideration in all of the projects in the region. Approvals routinely take a long time.

“We’re continuing towards the goal of trying to simplify regulations and remove as many regulatory barriers as possible, making it as easy as possible to work and protect everybody’s interests,” Fleming says.

Despite that, “Sometimes you feel that’s moving along at a glacial pace,” Fleming says. “We would, of course, prefer that the pace was faster and simpler.”

The government wants exploration and wants a fair share of the benefits and the economic pie that is created, Fleming says. “That’s absolutely appropriate,” he concedes. “We’ll always come to a fair sharing of the pie and get on with business. We’ll always work on solutions to the issues that come up.”

Over all, Fleming says, the future is positive. “My outlook is very optimistic. It’s a good time to be in the business.”

While Petro-Canada is well established in Atlantic Canada, Norsk Hydro is a relative newcomer, establishing its first holding in the region through a swap with Petro-Canada in 1996 that allowed Hydro to participate in the Terra Nova and Hibernia developments. The company also bought into discovery licenses offshore both Newfoundland and Nova Scotia with small equity positions.

“That was our asset base,” Jim Keating, Norsk Hydro Canada Oil & Gas Inc.’s vice president of field development and operations, says.

The company now has nine exploration licenses, four in Nova Scotia and five in Newfoundland, operating two and partnered in seven.

“Hydro tends to be an operator wherever we do business. We’re emerging in that role now,” Keating says. “Our focus is to continue to evaluate our portfolio and to look for opportunities on the East Coast and in that sense to further pursue our operating ambitions.”

Norsk Hydro has acquired competence in North Sea and would like to leverage and export that expertise abroad, Keating says. “As Hydro expands internationally, we have an affinity for harsh environment development, whether it is in the North Sea or Barents Sea or the East Coast of Canada. There is a good fit between the environmental and technical challenges of Atlantic Canada and our experience. That’s part and parcel of why we’re here,” he says. It is also why the company is investing in the Hebron Ben-Nevis project. Expertise from the Grane platform in the North Sea could have significant application in Atlantic Canada.

According to Keating, the drawback of a slower development process in Atlantic Canada has not been a deterrent to Hydro’s investment in the region. “The regulatory review and approval process is slow,” Keating says, “but we have patience. We consider Canada to be a core area. We think it’s a place Norsk Hydro can do business.”

Government and oil

Ed Byrne, minister of natural resources, points to the upcoming Hebron development as one of several good omens for the province.

“The two things we need right now are the next development, which we believe is Hebron Ben-Nevis, and the next discovery,” Byrne says. “Our industry continues to expand,” he says. “I think we’re right on the precipice of another development and of one, if not more, discoveries.”

Recent milestones, such as Husky Energy’s White Rose, are indicators that operators can work successfully in Newfoundland.

“White Rose has been beneficial for any number of reasons,” Byrne says, “not the least of which is that much of the construction work was done here in Marystown. The project was delivered ahead of time and under budget.”

Byrne is convinced that there is a lot of opportunity in Newfoundland and Labrador’s offshore.

“We believe we have world-class facilities and world-class projects, and we are looking for opportunities to grow in the industry,” he says.

Certainly, renewed interest in the region supports Byrne’s opinion. Norsk Hydro is increasing its offshore interests, and Shell has re-entered the region with an investment in the deepwater Orphan basin after a 15-year absence.

“I’ve had the opportunity to meet with the president of Shell. It is very clear from his point of view that moving back into Atlantic Canada is a long-term commitment,” Byrne says.

According to Byrne, the future is bright. “We are excited about future opportunities. The government is open for business.”

Premier Danny Williams’ position echoes Byrne’s positive stance.

“The potential here is huge,” Williams says. “We’re just really on the cusp of it. We are now at a point when the industry has really matured. We’re now poised for the next development.”

Williams, among others, hopes the renewed interest is a sign of good things to come for a province that has seen some difficult years. His primary interest is to secure revenues from production activity. For that reason, Williams has turned his focus to Newfoundland and Labrador’s royalty regime.

“There has been some perception that the province is talking tough,” Williams says, “but nothing is further from the truth. On a go forward basis, we just want what’s fair.”

Perception in the industry seems to be that the province has achieved a level of fairness. Certainly, that is the view expressed by Petro-Canada.

It’s in the province’s best interest to encourage business, Williams says. “The opportunity here is huge for people who want to invest in this province. I’m in favor of further development,” he says.

“We’re asking the oil companies to have a more significant presence. We welcome them here. Even though we have environmental concerns and are environmentally conscious, we have flexibility,” Williams says.

Williams is clearly working to open the province to increased E&P activity. “We’re excited about it,” he says, “very excited.”

Fred Way, chairman and CEO of the CNLOPB, sees today’s activity as the precursor to increased E&P activity in the province.

“In the medium term, prospects in the area are really good, probably better than they have been in a long, long time,” Way says. “We have the core of activity in the Jeanne d’Arc basin, including Hibernia and Terra Nova, with White Rose ready to come onstream and Chevron actively planning to develop Hebron.”

Husky Energy is drilling exploration wells in the South Whale basin this year, and ConocoPhillips is doing a lot of work in the Laurentian sub-basin, he says, not to mention the seismic work going on in the Orphan basin.

Though the numbers are not large, the amount of drilling activity has increased substantially.

“In the next 18 months, we’ll probably have eight installations,” Way says, “which is significant because it is doubling.”

The province is proud of the White Rose project, which has set a precedent, according to Ruud Zoon, vice president of East Coast operations for Husky Energy.

“The project has gone very well. We should have first oil before the end of the year,” Zoon says.

White Rose will also provide infrastructure for future developments, according to Zoon, who hopes upcoming appraisal drilling on the field will uncover additional reserves.

The tight international rig market has led the operator to step outside the norm, securing the RowanGorilla VI jackup to drill in the Jeanne d’Arc basin, a first for the area, Zoon says.

TheGorilla VIis also drilling an exploration well for Husky in the South Whale basin, which lies southwest of the Jeanne d’Arc basin in fairly shallow water, Zoon says. Successful use of the jackup could open up options that the region hasn’t previously seen.

According to Zoon, Husky will continue delineation drilling in 2006 in deeper water in the Jeanne d’Arc basin in hope of finding additional pockets of oil to tie back to the

“We are also looking at gas development,” Zoon says. When production begins on the field, theSeaRose FPSO will produce up to 150 MMcf/d of gas, which will be reinjected north of the field to be produced later.

The significant gas reserves led Husky to look into development options over a year ago. Twenty companies submitted proposals for gas development, and three were chosen to provide further pre-feed studies. Three will submit their studies for Husky’s evaluation. Meanwhile, Husky is looking at possible compression upgrades for theSeaRose to increase its gas processing capacity and to effect export, Zoon says.

There is a lot of gas in the area, as much as 2.7 tcf, according to the CNLOPB. Husky’s delineation drilling in the Jeanne d’Arc basin will delineate gas as well as oil reserves, Zoon says. “Over the next two or three years, we hope to get a better feel for the reserves.”

Husky is working together with Hibernia and Terra Nova to find a regional solution, Zoon says. “That effort just kicked off. We’ve signed a memorandum of understanding with ExxonMobil and Petro-Canada,” he says.

While gas research moves forward, Husky is conducting its first exploration drilling in the South Whale basin and planned to shoot additional 3D seismic during the summer over new exploration acreage in the Jeanne d’Arc basin just north of White Rose. Husky acquired three new blocks in the last licensing round and is hoping data gathered in the summer survey will result in well locations for a drilling program in 2006, Zoon says.

Husky has big plans for its holdings offshore Newfoundland, according to Zoon.

“The bottom line is that the East Coast is very important to Husky,” Zoon says. “White Rose is just a start.”•

CNG research continues

The Centre for Marine CNG Inc. is a fairly new entity in Atlantic Canada. Despite its neophyte status, the center is one of a kind and is paving the way for commercializing stranded gas.

Michael Hanrahan, managing director for Centre for Marine CNG Inc., is excited about the opportunities presented by compressed natural gas. His organization has brought together a broad group of people to examine options for CNG.

“We’re engaging stakeholders including regulators, the coastal state authorities, departments of energy, municipal and regional governments, the Canadian Environmental Assessment Agency, classification societies, operators, and service and supply companies early on in the process because we want the shore-based CNG receiving terminals as well as the CNG supply chain well received from the outset,” Hanrahan says.

The organization is working on a broad spectrum of issues, Hanrahan says, which he has broadly classified under four core research areas.

The first, Hanrahan calls facilitated communication. He defines this as, “determining what we have to do to commercialize CNG.” The second is economic evaluation and feasibility. The other two areas are more technical. The third is gas behavior, which includes understanding and analyzing the behavior of gas. And the fourth is maritime systems, “which will require harmonizing rules from classification societies to set guidelines for CNG transport,” Hanrahan explains.

The Centre is making significant strides, recently acquiring premises in St. John’s and beginning to purchase test equipment that will allow unique research capability.

“We’re not only increasing the knowledge base of gas behavior for the industry as a whole, we’re actually going to be conducting practical or applied research, which is one of the more exciting aspects,” Hanrahan says.

“Also, we are in Newfoundland, which presents some unique opportunities because there is an ocean technology cluster in St. John’s: our center for CNG, the center for cold ocean research, the Institute of Ocean Technology, marine engineering facilities at Memorial University, and the Marine Institute. There is a hub of knowledge and innovation that we can work with,” he says.

In mid-August, the Centre hosted an international marine CNG standards forum attended by 100 registrants from 12 countries.

Because CNG is a new area of research, there is an enormous amount of work to be done, but Hanrahan has great expectations.

“One of our key performance indicators at the end of five years is to be an integral part of one project on every continent with the exception of Antarctica. We truly believe there is great opportunity around the globe for CNG technology,” Hanrahan says.