New life is being breathed into the Newfoundland and Labrador offshore oil industry thanks to two recent back-to-back light crude discoveries in the deepwater Flemish Pass Basin.
The larger of the two discoveries, the Bay du Nord exploration well – announced in September by Statoil ASA and joint venture partner Husky – confirmed the existence of 300 to 600 million barrels of 34 degree API oil recoverable.
Located some 500 kilometers northeast of St. John’s, in 1,100 meters of water – and described as “high impact” by both companies – the Bay du Nord light oil discovery represents Statoil’s largest-ever operated oil discovery outside of Norway.
Geir Richardsen, Statoil Canada’s vice president of exploration, said follow-up plans include acquiring additional 3-D seismic surveys and drilling exploration and appraisal wells in the largely unexplored Flemish Pass Basin.
Given continued success, he said, the Bay du Nord discovery could be producing light crude sometime after 2020.
“We rank the Grand Banks and the Flemish Pass Basin very highly,” Richardsen said. “Canada is a core area for us – and it’s an environment where we hope to create good value.”
Hailed as the largest oil discovery in the Newfoundland and Labrador offshore in 30 years, the “high impact” Bay du Nord well couldn’t have come at a more critical time in the province’s history of offshore oil and gas development.
Game Changer
Simply put, the Bay du Nord discovery is a “game changer” for Newfoundland and Labrador’s offshore oil and gas industry.
Statoil’s light crude discovery has opened up a new oil and gas frontier – from the continental slope to the deep water – that could arrest the province’s projected crude production decline and attract new industry players to several of the province’s largely unexplored deepwater basins.
According to the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB), the province currently produces approximately 280,000 barrels per day from offshore fields – or about 40 percent of Canada’s light crude production. During the next decade, however, the maturing Hibernia, Terra Nova and White Rose fields will experience predictable and steep decline curves.
When Hebron, the fourth commercial energy project in the Jeanne d’Arc Basin, comes on stream in 2017, overall production will jump to approximately 320,000 barrels per day. But, after several years of peak oil production at Hebron, the province’s offshore production will resume its projected decline curve.
Involved in the Grand Banks since the late 1990s (though its predecessor Norsk Hydro ASA), Statoil holds non-operated interests in the Hibernia and Terra Nova fields, the Hibernia tie-in and Hebron development fields, as well as non-operated interests in exploration licenses in the Jeanne d’Arc and East Orphan basins.
Applying lessons from Statoil’s deepwater oil and gas operations in the Barents Sea, north of Norway, to its deepwater exploration of the Flemish Pass Basin, Richardsen said, “You get adapted to the distance from land, and the climate, weather and water depth. In fact, the deeper water provides protection from scouring by icebergs.”
The Bay du Nord oil reservoir – a Jurassic-age sand with excellent porosity and permeability – lies two kilometers below the seabed.
“Bay du Nord’s geology can be drilled using standardized drilling operations,” Richardsen said. “For example, we don’t have any high pressure reservoir conditions to contend with.”
“Bay du Nord could become a giant field if the satellite blocks turn out to also contain light oil,” said AAPG member Michael Enachescu, adjunct professor of geophysics at Memorial University’s Department of Earth Sciences in St. John’s and chief geophysicist with Calgary-based MGM Energy Corporation. “Bay du Nord could become the first deep water development in offshore Canada.”
Shining the Light
In fact, each of Statoil’s three discoveries in the Flemish Pass Basin are located on separate geological structures, within 10 to 20 kilometers of each other.
The Mizzen exploration well, drilled in 2009 by Statoil and its joint-venture partner, Husky, flowed 6,290 barrels per day of 22 degree API crude and defined a resource of 100 to 200 million barrels of oil recoverable. The Statoil-operated light oil discovery at Harpoon, drilled in June 2013, will require additional appraisal wells to determine its magnitude.
One production scenario for Statoil’s three light oil discoveries might involve the construction of a central production facility with subsea tiebacks.
Comparable in size to the Jeanne d’Arc Basin, which has been tested by 155 exploration and 55 development wells, the Flemish Pass Basin has been explored by just 10 wells to date. The Statoil-operated leases span 8,500 square kilometers or approximately 75 percent of the Flemish Pass Basin; the remainder of the basin is open crown land, a portion of which will be publicly auctioned in 2014 by the C-NLOBP.
In 2004, the C-NLOPB released a Flemish Pass Basin hydrocarbon resource assessment, calculating that the basin contained 1.7 billion barrels (at a 50 percent probability) with expected field sizes ranging from 44 to 528 million barrels. An upward revision of the basin’s hydrocarbon potential may be justified, given Statoil’s three exploration discoveries, which represent a 75 percent success rate.
“In my opinion, Statoil is the right company with the right expertise and people – it has emerged as a leader in offshore Newfoundland,” added Enachescu, a former Husky geophysicist with 30 years of experience in the Newfoundland and Labrador offshore. “The Statoil-operated discoveries of the Flemish Pass Basin also shine a new light on the potential of the Southeastern Orphan and Carson basins.”
“The key to successful exploration is the presence of source rocks,” he added, “and I believe that these basins are on the ‘Late Jurassic Superhighway’ (for source rocks) which extends from Nova Scotia, to the Grand Banks and the Flemish Pass, and across the Atlantic to the Irish Sea and the Porcupine Basin.”
Show of Support
Enachescu’s comments were echoed by Derrick Dalley, Newfoundland-Labrador’s minister of natural resources, who said “The discovery is a result of an ambitious and targeted drilling campaign in the Flemish Pass Basin.”
“The discovery proves there is oil in our province’s deepwater basins and it will encourage increased offshore exploration activity,” Dalley said. “The Provincial government is committed to encouraging exploration in frontier areas and is investing in geoscience, marketing, and updating the land tenure system to attract more interest and players.”
The province’s new land tenure system, released in December, was designed to improve transparency, predictability and input by industry. Aligning its land tenure system more closely with those of other offshore jurisdictions, the C-NLOPB has created three different categories:
- Four-year cycles for regions of low activity.
- Two-year cycles for regions classified as high activity.
- One-year cycles for mature regions.
The C-NLOPB also announced a 2013 call for nominations in the Labrador Southern and Eastern Newfoundland regions.