- Exxon, BP, Chevron among others committing drilling spending
- Newfoundland and Labrador, Nova Scotia draw exploration work
Statoil ASA was the most active bidder for exploration licenses off Canada’s Atlantic Coast awarded Thursday as some of the world’s largest producers committed to spend about C$1.29 billion ($969 million) for the prospect of long-term growth.
The Norwegian company and its partners successfully bid for six blocks off Newfoundland and Labrador and Statoil picked up two on its own, off Nova Scotia. Chevron Corp., Exxon Mobil Corp., BP Plc, BG Group Plc and Cnooc Ltd.’s Nexen subsidiary were part of winning bids to drill off Newfoundland. Licenses to seven of 11 blocks on offer were sold in the province’s first-ever scheduled auction. Nova Scotia received bids for two of nine blocks offered.
The producers are pledging future drilling even as they shelve near-term projects to weather a crude price slump that has extended 16 months. The Atlantic Canadian provinces have been seeking to spur investment to bolster government revenues during the downturn. Newfoundland released a study last month that said the area being licensed for exploration contains a resource potential of 12 billion barrels of oil and 113 trillion cubic feet of gas, in place.
“These are the biggest of the biggest companies,” said Chris Cox, an analyst at Raymond James Ltd. in Calgary. “They’re commitments to spend in the future, not today, so they’re leaving the option open.”
Canada’s East Coast projects have largely escaped the delays and cancellations seen in the oil sands during the market collapse, where 18 near-term projects have been shelved this year, according to ARC Financial Corp. Husky Energy Inc. is the exception, last year deferring a final investment decision on its West White Rose development about 350 kilometers (217 miles) southeast of Newfoundland’s capital of St. John’s as it focuses on projects with quick returns.
Global offshore projects have a break-even price of as low as $60 a barrel for Brent crude, compared with around $80 for the oil sands, according to an analysis released last month by Rystad Energy AS. Brent is trading below $45 a barrel, down about 60 percent from its peak last year.
“The successful bids in these frontier areas offshore Canada are in line with Statoil’s strategy of deepening our position in prolific basins and securing access at scale, while also adding important optionality to our exploration portfolio,” Tim Dodson, the company’s executive vice president for exploration, said in a statement on the company’s website.
Operators in Canada’s fields offshore Newfoundland have to contend with the threat of icebergs and 30-meter waves reaching their platforms. Companies have been attracted to the area in recent years after advances in technology to allow drilling in deeper waters and following disappointments in other offshore regions, such as the Arctic, Morocco and the Falkland Islands, according to Cox.