Nor­way’s Sta­toil looks to New­found­land off­shore

The Hamilton Spectator - - BUSINESS - DAN HEAL­ING

CAL­GARY — A week af­ter Sta­toil sold off all its as­sets in Al­berta’s oil­sands, it looked east­ward, to New­found­land’s off­shore.

There, the Nor­we­gian en­ergy gi­ant saw op­por­tu­nity in the North At­lantic, an­nounc­ing this week plans to drill two off­shore ex­ploratory wells this sum­mer in the Flem­ish Pass Basin, roughly 500 kilo­me­tres east of St. John’s, N.L.

It is a gam­ble — pulling out of one area with vast pools of proven oil re­serves, while si­mul­ta­ne­ously launch­ing a drilling pro­gram in the open ocean, where dis­cov­er­ing com­mer­cially vi­able reser­voirs is not cer­tain.

But an­a­lysts say there is logic be­hind Sta­toil’s de­ci­sion. While com­pa­nies shift­ing their in­vest­ments to off­shore ex­plo­ration are tak­ing on more risk, there is up­side.

The crude found be­neath the ocean floor is gen­er­ally lighter and more valu­able than oil­sands bi­tu­men. Off­shore oil can also be shipped any­where in the world by tanker, whereas Al­berta’s land­locked oil re­quires pipe­lines to ac­cess mar­kets abroad — pipe­lines that still need to be built.

“You fill up a tanker from your plat­form and you send it to who­ever is will­ing to pay the best price for it,” said Kevin Birn, se­nior direc­tor for IHS Markit. “Whereas in Western Canada, the his­tory has been you put it in a pipe­line and it goes south. Those prices are sub­ject to trans­porta­tion costs down to the Gulf Coast and you have a lower price as a re­sult.”

Sta­toil Canada pres­i­dent Paul Ful­ton said the de­ci­sion to in­vest in the off­shore is in line with the par­ent firm’s strat­egy of fund­ing “safe, high-vol­ume projects (with) low-car­bon” emis­sions. He said Sta­toil’s exit from the oil­sands was a “com­mer­cial” de­ci­sion that had noth­ing to do with crit­i­cism from en­vi­ron­men­tal­ists in Nor­way, as has been sug­gested by some.

“The up­stream emis­sions from po­ten­tial projects out there (on the East Coast) are very good, so we see that as a good fit and it fits into the com­pet­i­tive port­fo­lio of Sta­toil glob­ally,” Ful­ton said in an in­ter­view.

An­a­lysts, how­ever, say crit­i­cism in Nor­way had to have been a fac­tor in the sale of oil­sands as­sets.

“Sta­toil in par­tic­u­lar was fac­ing some po­lit­i­cal push­back from Nor­way as a state-owned com­pany op­er­at­ing in the oil­sands,” said Nathan Nemeth, an up­stream re­search as­so­ciate at Wood Macken­zie. He said oil­sands and off­shore projects face long plan­ning phases, high up­front costs and com­pli­cated con­struc­tion is­sues, but cap­i­tal pay­back for off­shore comes much more quickly be­cause of flush pro­duc­tion from freshly drilled wells. Oil­sands pro­duc­tion, on the other hand, is steady and pre­dictable for decades.

Sta­toil’s off­shore in­vest­ment comes as Cal­gary-based Husky En­ergy con­firmed ear­lier this week it had shipped its first oil to an un­named cus­tomer in China from the White Rose project, about 350 km east of New­found­land.

AS­SO­CI­ATED PRESS FILE PHOTO

Sta­toil’s Cana­dian branch will drill two off­shore ex­ploratory wells in the Flem­ish Pass Basin, about 500 kilo­me­tres east of St. John’s, N.L.

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