N.L. set to an­nounce oil bids

Simcoe Reformer - Times-Reformer - - NATIONAL NEWS - GE­OF­FREY MOR­GAN

CAL­GARY — Ex­ec­u­tives of New­foud­land Crown cor­po­ra­tion Nal­cor En­ergy will find out Wed­nes­day whether mil­lions of dol­lars in seis­mic ex­plo­ration work and trips to the world’s oil cap­i­tals were enough to at­tract lu­cra­tive bids from global oil and gas ma­jors.

For the first time in two years, the Canada-New­found­land and Labrador Off­shore Petroleum Board will an­nounce win­ning bids for prospec­tive off­shore ex­plo­ration blocks, which in­de­pen­dent eval­u­a­tors be­lieve con­tain a to­tal of 11.7 bil­lion bar­rels of oil and 60.2 tril­lion cu­bic feet of nat­u­ral gas.

In 2016, the last time the C-NLOPB held a bid­ding round for an off­shore ex­ploratory block, BP Plc marked its en­try into the prov­ince’s oil and gas sec­tor with a win­ning bid of $461 mil­lion for a prospect that con­tained an es­ti­mated 25.5 bil­lion bar­rels of oil and 20.6 tril­lion cu­bic feet of gas.

Ex­pec­ta­tions for Wed­nes­day’s bid are high and should re­veal whether the provin­cially owned en­ergy com­pany’s re­vamped ap­proach to at­tract­ing oil and gas bids con­tin­ues to be a suc­cess.

“We have a say­ing around here, which is ‘Those who use crys­tal balls end up with bro­ken glass,’ ” said Jim Keat­ing, Nal­cor’s ex­ec­u­tive vice-pres­i­dent, off­shore de­vel­op­ment. He de­clined to pro­vide an es­ti­mate of what Wed­nes­day’s bid might fetch in work com­mit­ments from oil and gas com­pa­nies.

“I think we’ve ex­pe­ri­enced a real good level of in­ter­est from oil and gas com­pa­nies for the last sev­eral months and for the bet­ter part of a year now since the li­cense area was an­nounced, so that makes us op­ti­mistic,” Keat­ing said.

The prov­ince, through Nal­cor and the C-NLOPB, made ma­jor changes to its bid­ding process be­gin­ning in 2011. It moved from a sys­tem where any en­trant could bid at any time to a sched­uled bid process.

Nal­cor also be­gan spend­ing sig­nif­i­cantly more money on 2D and 3D seis­mic work to bet­ter un­der­stand the prov­ince’s off­shore ge­ol­ogy and de-risk the ex­plo­ration blocks for prospec­tive oil com­pa­nies.

In ad­di­tion to con­duct­ing that ex­ploratory work, the Crown cor­po­ra­tion now sends its geo­sci­en­tists to Cal­gary, Hous­ton, Lon­don, Oslo and other oil cen­tres to present their find­ings to the world’s largest oil and gas pro­duc­ers. Keat­ing was in Cal­gary last week pro­mot­ing his prov­ince’s oil and gas prospects.

“Since 2011, we’ve in­vested just over $100 mil­lion. That level of in­vest­ment has re­vealed just about $2.5 bil­lion in bid­ding thus far and there are more bid­ding rounds to come,” Keat­ing said.

By com­par­i­son, in the pre­vi­ous 20 years the prov­ince man­aged to at­tract an av­er­age of just un­der $100 mil­lion per year in bids.

The new ap­proach has helped sus­tain and even ex­pand the prov­ince’s off­shore en­ergy sec­tor in re­cent years even as global oil prices col­lapsed and the world’s largest oil and gas com­pa­nies scaled back spend­ing, New­found­land and Labrador Oil and Gas In­dus­tries As­so­ci­a­tion CEO Char­lene John­son said.

“We’ve now seen seven new en­trants to our prov­ince and that in ef­fect dou­bles the num­ber of op­er­a­tors with acreage in the prov­ince so it’s helped at­tract for­eign di­rect in­vest­ment,” she said.

The ad­di­tional bids are lead­ing to more work in the prov­ince’s en­ergy sec­tor, John­son said, as five com­pa­nies have sub­mit­ted drilling pro­grams to the pro­vin­cial reg­u­la­tor and a sixth pro­gram is ex­pected.

Exxon Mo­bil Corp. is ex­pected to drill on its parcels in the prov­ince’s Flem­ish Pass in the sum­mer of 2019 and BP has is­sued re­quests for drilling pro­pos­als in the last two weeks.

“There are about 25 to 30 of these li­cense rounds go­ing on each year all around the world so we need to have that leg up and ju­ris­dic­tions need to be com­pet­i­tive,” John­son said, adding that Nal­cor tak­ing on much of the ex­ploratory risk helped pro­vide that leg-up.

She also said the fed­er­allyap­proved car­bon tax plan in­tro­duced in St. John’s this week would not un­duly hurt the lo­cal oil and gas sec­tor.

“I think it strikes a bal­ance,” John­son said of the car­bon tax. She said the tax ex­empts oil and gas ex­ploratory work, which is im­por­tant given the prov­ince’s at­tempts to en­cour­age the growth of the in­dus­try.

She said the pro­vin­cial govern­ment un­der­stands the en­ergy sec­tor still ac­counts for 24 per cent of New­found­land and Labrador’s gross do­mes­tic prod­uct, down from 33 per cent of GDP prior to the oil price crash of 2014.

The Na­tional En­ergy Board fore­casts New­found­land and Labrador oil and gas pro­duc­tion will av­er­age over 300,000 bar­rels of oil per day this month, a sig­nif­i­cant in­crease over the 227,000 bpd oil plat­forms in the prov­ince pumped at the be­gin­ning of the year, driven by ris­ing pro­duc­tion from ExxonMo­bil’s He­bron pro­ject, which re­ceives global oil prices as it’s not sub­jected to Canada’s pipe­line con­straints.

In its fall fis­cal up­date, re­leased this week, New­found­land and Labrador an­nounced its deficit would come in $135.9 mil­lion lower than ex­pected at $547 mil­lion par­tially as a re­sult of higher than ex­pected oil prices.

The He­bron oil plat­form is seen an­chored in Trin­ity Bay, N.L., in 2017. On Wed­nes­day the Canada-New­found­land and Labrador Off­shore Petroleum Board will an­nounce win­ning bids for prospec­tive off­shore ex­plo­ration blocks, which in­de­pen­dent eval­u­a­tors be­lieve con­tain a to­tal of 11.7 bil­lion bar­rels of oil and 60.2 tril­lion cu­bic feet of nat­u­ral gas. THE CANADIAN PRESS FILES

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