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Petroleum News: Newfoundland gamble on grand scale

Chevron-partnership ready to spud C$140 million exploratory well in Orphan basin in mid-August; downplays chances of success

By Gary Park
For Petroleum News

Newfoundland’s storm-tossed seas, which produce some sickening lurches at times for offshore operators, are entering what could be their most exciting phase.

In a 40-year history replete with stories of success, setback and suspended hope there has been nothing to stack up against the C$140 million exploratory well a Chevron Canada-led partnership will spud in mid-August in the deep waters of Orphan basin.

Great Barasway, to be drilled in 7,900 feet of water and targeting a subsea depth of 24,300 feet, is the biggest test yet of a basin some believe could easily eclipse the Jeanne D’Arc basin, which holds Newfoundland’s three producing fields, Hibernia, terra Nova and White Rose and the stalled Hebron-Ben Nevis project.

Depending on how successful the wildcat is, the partnership of Chevron as 50 percent operator, sister companies, ExxonMobil and Imperial Oil each with 15 percent and Shell Canada 20 percent could open the door to a total of 12 wells, including two more this year, chasing a grand prize that includes four oil pools each believed to be larger than Hibernia’s initial 884 million barrels.

The license holders, who attracted Shell Canada last year on a farm-in basis, paid C$673 million for eight parcels covering 5.25 million acres in late 2003.

Drilling by Eirik Raude

Great Barasway, to be drilled by the huge semi-submersible Eirik Raude, pushes exploration into a whole new territory in a region notorious for violent storms and icebergs. The water depth is 28 times greater than Hibernia and Chevron is cautiously limiting its odds of success to 10 percent as it puts geological theories to the test.
Paul Barnes, Atlantic Canada manager for the Canadian Association of Petroleum Producers, told the Globe and Mail that it might take a second, third or fourth well to “determine the relative prospectivity of an area.” If the initial well struck pay dirt that would be a “hugely good news story,” he said.

A Chevron spokesman has told reporters that the most optimistic view of Great Barasway is accompanied by a “fairly low probability” of success.

Reinforcing that view is the knowledge that Newfoundland has logged fewer than 300 wells and needed 13 wells to achieve its first oil show at Hibernia.

However, the Orphan program gets Newfoundland out of its wheel-spinning mode that started earlier this year when the government and another Chevron-led partnership abandoned efforts to negotiate fiscal and regulatory terms for the C$5 billion Hebron-Ben Nevis project.

The two sides have made no attempt to resume negotiations, but ExxonMobil Canada President Liam Mallon, while waiting for the province to unveil a new energy plan this year, has warned that unless Newfoundland takes a stable, predictable and cooperative path its offshore could go into decline.

Despite the uncertainty spawned by Hebron, others are pressing ahead.

Husky Energy has signed a farm-in deal with Norsk Hydro Canada Oil & Gas to drill a well on the shallow waters of the Grand Banks. The West Bonne Bay prospect is in about 1,000 feet of water and is close to the producing Terra Nova field, owned 72.5 percent by Petro-Canada and 27.5 percent by Husky.

Petro-Canada, which holds 10 percent of West Bonne Bay although it won’t take part in the C$50 million well, is also poised to drill a second well in the Far East portion of the Terra Nova field sometime this quarter, adding to the development wells which started pumping in March.

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