IN THE NEWS / Oil Firms Target East Coast Sites
Saturday, September 19, 1998
By IAN MCKINNON
Calgary Bureau The Financial Post
The hunt for oil and natural gas off the East Coast intensified last week as a number of companies increased their holdings or expanded drilling plans.
Mobil Oil Canada and partners committed to spend $155.1 million over the next five years to secure six exploration licences on the Grand Banks, off Newfoundland.
Joining in Mobil's bids, which cover 415,250 hectares, were Chevron Canada Resources Ltd., Norsk Hydro Canada Oil & Gas Inc. and Petro-Canada.
Mobil holds interests of between 30% and 50% and is the only firm to have a role in all six bids. Petro-Canada said its pledges netted out to $38 million for 88,000 hectares.
The licences granted by the Canada-Newfoundland Offshore Petroleum Board include two on the eastern edge of Canadian waters in a lightly explored region called the Flemish Pass basin. The other four are located to the west, in the Jeanne d'Arc basin, where fields like Hibernia and Terra Nova are located.
A leading player, with more than 30 years of experience in the East Coast oilpatch, Mobil used the sale to build upon its knowledge and portfolio of prospects, said Andrew Adams, Mobil's vice-president of Newfoundland exploration and production.
Low oil prices are not affecting Mobil's long-term view of the region, he said.
"The East Coast is still a very young industry, and that's part of the appeal for Mobil. We can get a strong toehold at an early stage."
Seismic data will be shot and interpreted before drilling begins, Adams said. No schedule has been set yet.
A petroleum board official said the total work commitment tally of $175.4 million is a record for the 11 years the board has been holding land sales. Husky Oil Operations Ltd., PanCanadian Petroleum Ltd. and Tatham Offshore Canada Ltd. were also awarded parcels in the latest go-round.
Newfoundland's onshore potential has attracted Encal Energy Ltd., a Calgary-based intermediate. It will participate in a $10-million exploratory well at Shoal Point on the Port au Port Peninsula in western Newfoundland. Drilling is scheduled to begin late in the fourth quarter.
The well will be located about 24 kilometres northeast of a non-commercial find made in 1995 by PanCanadian and Hunt Oil Co. of Texas. Encal will have a 37.5% interest in the drilling program, which will be operated by PanCanadian.
The Newfoundland well is an extension of Encal's interest in the Gulf of St. Lawrence, said Jim Reimer, vice-president of exploration. Encal and Shell Canada Ltd. have committed to drill four wells by 2000 on Anticosti Island, Que. The first two holes were drilled earlier this year and came up dry.
Reimer said a number of wells are needed to assess a play so two failures are not discouraging.
"We're very encouraged that there's oil to be found there. But certainly it's higher risk than a well in Western Canada." The potential reward makes the gamble worthwhile, and costs for the onshore wells are not substantially different than a deep test out west, he said.
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