James - RIK / Newfoundland
More Oil On The Grand Banks?
Kerm's Korner - Wed May 6th
Amoco Canada Petroleum Ltd. has returned to Newfoundland to make an application for a significant discovery on a Grand Banks property it drilled last year, The Evening Telegram has learned.
The Canada-Newfoundland Offshore Petroleum Board confirmed Wednesday Amoco's application for its Bonne Bay property, but will not comment further until a complete assessment of the application has been carried out, said the board's acting chairman, John Fitzgerald.
The application itself means little, since a significant discovery is defined only as an accumulation of oil or gas with "potential for sustained production." And the CNOPB has two years before it is required to make public such details as flow rates and oil pressure from the well.
But the significance may lie in Amoco's timing. The Calgary-based subsidiary of the U.S. oil giant could have waited as long as six years before it was required to apply for anything.
"Actually, they have until the end of the term of their licence to make this application," Fitzgerald said. "By drilling the well they have earned the right to hold (the property) six years or more before they had to file."
Amoco Canada, which drilled 33 dry holes on the Grand Banks in the 1960s and '70s, successfully bid for the Bonne Bay property in 1996.
In June 1997, at the Newfoundland Ocean Industries Association annual conference in St. John's, Amoco Canada chairman and president Bob Erikson said the Bonne Bay property could prove to be a 300 million barrel discovery.
A year earlier, at the 1996 NOIA conference, Amoco land manager Duke Anderson boldly said the company was optimistic it could see first oil from Bonne Bay by 2003.
"It's a very aggressive target," Anderson said at the time. "In order for it to achieve this, things must go right."
In terms of drilling exploration, however, things did not go right.
The company won its exploration licence by committing to spend $90.3 million there, and although drilling began on schedule June 30, 1997, Amoco is believed to have spent double its commitment after experiencing down-hole problems and weather delays.
The original 4,400-metre drill program was scheduled for 70-90 days but the Bill Shoemaker rig did not pull up until more than 200 days later, on Jan. 25, 1998.
A major oil discovery, however, would make it all worth while. If Amoco is granted significant discovery licence, it can hold onto the property virtually forever.
"If they are successful in their application for significant discovery, then they can obtain a significant discovery licence which allows them to hold the land until it's economic to bring it into production," Fitzgerald said. "There are some constraints on it, but it's virtually in perpetuity."
A significant discovery licence is required before an oil company can apply for a commercial production licence, he added.
Experience has shown oil companies can obtain significant discovery licences without a massive, provable discovery.
In the early 1990s, Petro-Canada was turned down for a significant discovery licence forits King's Cove property by the CNOPB, but was later granted the licence after an appeal to the Supreme Court of Newfoundland.
"(Petro-Canada) drilled and encountered some hydrocarbons but didn't have high flow rates," Fitzgerald said. "We denied the application but they took the question to court seeking judicial interpretation, and Justice Leo Barry determined the applicant was entitled to a fairly generous interpretation (of the Canada-Newfoundland Offshore Act).
"Generally, the philosophy of government has been people who expend the money to actually explore are entitled to hold the property," he said.
Amoco Canada did not return calls from The Telegram Wednesday.
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