The Canadian Press: A basin full of huge oil potential

Exploration well drilling starts in Newfoundland’s Orphan area
By JAMES STEVENSON

CALGARY — Drilling has started on the very first exploration well in the Orphan Basin, a massive and relatively unknown area in the Atlantic Ocean northeast of St. John’s, N.L., in what one partner described Wednesday as a “wild bet” to find vast oil reserves.

Shell Canada, which holds a 20 per cent stake in the 21,000-square-kilometre exploration play, said the well was spudded in the middle of August and should take between 100 and 120 days to drill. Early indications of what it uncovered should be known by year’s end.

Ian Kilgour, Shell’s senior vice-president of exploration and production, told an oilpatch investment conference in Toronto on Wednesday that one well would not be enough to tell the whole story of the vast basin.

“It’ll either be encouraging or discouraging — this is a wild bet,” said Kilgour, adding that the jackpot would be finding reserves similar or greater to the Hibernia field to the south.

“But when it’s the first well in a basin like this, anything can happen. So it truly is a wildcat; It truly has the potential to be disappointing. But we’re in there because the opportunity is enormous.”

The size of the prize is expected to be large if energy companies can find ways to tap the Orphan Basin’s reserves, which lie in deep water hundreds of kilometres from land, in an area subject to severe storms, freezing water and high winds.

It is estimated to hold between six to eight billion barrels of production capacity, which is more oil than in the Jean D’Arc basin on the Grand Banks, where Newfoundland’s three existing oil projects of Hibernia, Terra Nova and White Rose are located.

“I don’t for a moment believe that one well will tell the story. I don’t believe that if it’s disappointing it’ll stop us from other opportunities across the basin,” Kilgour said Wednesday.

Chevron Canada, which is the operator of the properties with a 50 per cent stake, said Wednesday that it’s only firm commitment is to drill the first well before re-assessing its options.

“We’ll drill this first well and see what we find,” Chevron spokesman Tim Murphy said Wednesday.

Murphy said the well will be one of the deepest ever drilled in the Canadian offshore, in nearly 2,400 metres of water and to a total depth of about 7,200 metres.

While Chevron is not disclosing total costs of drilling the well, industry observers say the total cost is expected to be upwards of $150 million.

Wade Locke, an energy economics professor at Memorial University in St. John’s, said the Orphan basin holds huge potential for Canada’s offshore energy sector and the Newfoundland economy.

“All of the metrics that we’re aware of suggest that Orphan Basin is even bigger than anything found to date in the Jean D’Arc.”

As part of their commitment to the region, Chevron and its partners paid a record $672 million for eight exploration blocks back in 2003.

The remaining 30 per cent is now divided evenly between Calgary-based Imperial Oil and sister-company Exxon Mobil Corp.

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