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The Economy 2002 - Newfoundland and Labrador

Petro-Canada intends to  spud 3 wells  in deep water areas, at a  cost of about $40 million  per well
	Credit: Department of Mines and Energy This map illustrates offshore licences in the Grand Banks area but does not include significant gas discoveries offshore Labrador

In the early 1960s, surveys detected hydrocarbon formations beneath the Continental Shelf off the coast of the province. Offshore oil drilling began in 1966 and was stimulated in the 1970s by the global shock of high oil prices and National Energy Policy incentives. In 1979, the oil patch was rewarded with the discovery of a large oil field—Hibernia. In the next six years, several other major discoveries were made, including Terra Nova, White Rose, and Hebron-Ben Nevis (see map). Exploration spending peaked in 1985 at $646 million and declined thereafter due to the removal of federal incentives, lower oil prices, and a shift in emphasis towards development of known commercial deposits.  The launch of the Hibernia project, combined with offshore Nova Scotia gas developments, among other factors, provided a significant stimulus in the late 1990s. Land sales in the Atlantic region have attracted the attention of several key players, leading to a resurgence in exploration activity. Between 1995 and 2001, over 777,000 km2 of seabed were surveyed off the province (about 158,600 km2 in 2001), almost triple the total seismic collection between 1979 and 1994. Seismic data are used to identify and to refine the selection of drill targets. Improved company cash flows as a result of higher oil prices, together with better technology and indications that hydrocarbon formations exist further offshore, have created heightened interest in deep water areas such as the Flemish Pass.		Key Exploration Facts 127 exploration wells drilled - 23 significant discoveries  Land sales 1996-2001- almost $700 million Exploration expenditures 1997-2001 - $600 million+ Outstanding bid commitments - $600 million+ New Exploration Plays The growing interest in deep water plays on the Grand Banks is consistent with activity elsewhere in the world as shallow water reserves decline. Technological advancements have increased drilling capability in water depths from 600 to 1,800 metres in the 1990s, and production is approaching depths of 3,000 metres. The Gulf of Mexico, Brazil, and West Africa currently account for about 85% of deep water developments. The Newfoundland and Labrador/Nova Scotia offshore boundary arbitration decision is anticipated in March 2002. The tribunal’s decision will establish a line to separate the offshore areas of the two provinces, and will be binding on both provinces. This decision will be significant as it will determine areas in which each province has jurisdiction as it relates to regulation, royalties and the collection of applicable taxes. Interest in the Laurentian Subbasin is expected to pick up once these issues have been settled.

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This information was current as of March 11, 2002.
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