The worst-kept secret in Newfoundland and Labrador’s oil industry has been confirmed: an exploration drilling campaign this summer in the Flemish Pass Basin has resulted in new discoveries.
The results will likely raise hopes about the future of the Bay du Nord project, which was deferred in March because of the global COVID-19 pandemic and collapsing oil markets.
But Equinor is not making any commitments.
“It is too early to comment on any potential impact of the discovery on the status of the deferred Bay du Nord development project,” an Equinor official wrote in a statement to CBC News.
“Equinor continues to assess the potential of Bay du Nord development project and the greater Flemish Pass Basin.”
Equinor issued a news release Thursday acknowledging that wells drilled at prospects known as Cappahayden and Cambriol were successful, but that it’s too early to provide specific information on volumes.
“We are pleased to have made two discoveries offshore Newfoundland,” Paul McCafferty, Equinor’s senior vice-president for international offshore exploration, is quoted as saying in the release.
Equinor declined an interview request.
Wells were drilled in deep waters
The wells were drilled by the Transocean Barents, a rig known as a harsh environment, ultra-deepwater semi-submersible.
The rig arrived at Bay Bulls this week, and is currently demobilizing before crossing the Atlantic Ocean for Norway in early November.
Equinor is a 60 per cent partner in the two prospects, with BP Canada owning 40 per cent.
The wells are located 500 kilometres east of St. John’s. The Cappahayden well has a water depth of about 1,000 metres, while Cambriol has a depth of 600 metres.
Equinor says it also drilled what’s known as a “top-hole” at another prospect known as Sitka.
When asked if further exploration will be carried out next year, the spokesperson wrote: “Equinor is currently evaluating next steps related to potential future activities in the Flemish Pass Basin.”
The discoveries come at a time of crisis for the Newfoundland offshore, which has been hit hard by the combination of a global pandemic, and weak and uncertain oil markets.
Equinor announced in March that it was deferring Bay du Nord in order to explore ways of making the project viable in an era of low oil prices.
Premier Andrew Furey believes Equinor’s finds are significant.
“Any time there’s a find that people are announcing, it’s a significant one I would think,” he said.
“Any time you have a significant find, on top of other finds, that changes the economic needle, one would think, of any structure for future developments.”
In a statement issued by the Newfoundland and Labrador Oil and Gas Industries Association, known as Noia, CEO Charlene Johnson said the news out of the Flemish Pass is much needed encouraging news for the industry.
“Offshore exploration is imperative to the future of the industry and these successful wells further demonstrate the exceptional prospectivity of the Newfoundland and Labrador offshore,” the statement reads.
“This announcement is welcomed by the membership of Noia and we look forward to further details about the wells being provided in the near future.”
Find brings optimism for the future
Rob Strong, a consultant in the oil and gas industry with over 40 years in the field, said it’s encouraging to see the activity taking place in the Flemish Pass.
“I’m reasonably optimistic. The Cambriol well and the Cappahayden well add to the existing wells that have been drilled in the Flemish Pass, and hopefully enhance the viability of Bay du Nord,” Strong said Thursday.”They’re both a little distance away from the core area…but they could be tied back to the central FPS zone.”
Jim Keating, executive vice-president of Nalcor Energy, said the findings show source rock in the area — which mean significant prospects for the future.
“For us, it’s good in a way in that it really confirms a view that we’ve had now for the last five or six years about the prospectivity of the western side of the Flemish, where it meets the eastern side of the orphan [basin], he said. “There’s some really significant prospects in that area.”
“What this shows with these two wells, likely the last of the wells that were planned pre-COVID, is that there is a significant opportunity for Newfoundland and Labrador in our prospectivity,” Keating added.
While Strong is optimistic for the future of the site, he says there are still some concerns for the projects in the future, such as major stakeholder Husky Energy being purchased by Cenovus and the current cost of a barrel of oil.
“Some of the leading consultants in the world say you need 50 dollar a barrel prices to justify deep water development,” he said. “Because of the long distance [away] that Bay du Nord is and the harsh environment, they probably need more than $50 a barrel.”
However, the activity at the site encourages Strong, showing that Equinor is still showing interest in the field despite several cancelled projects in 2020 and 2021.
3 other discoveries made in area
The project grew out of three earlier discoveries known as Bay du Nord, Bay de Verde and Baccalieu, with an estimated 300 million barrels of recoverable oil.
Equinor is partnered with Husky Energy on Bay du Nord, which adds a new wrinkle to the project, since Husky is being purchased in an all-stock deal by rival Cenovus.
Husky did not respond to a question about the future of its interest in the Bay du Nord project.
Furey and Energy Minister Andrew Parsons are scheduled to speak with Cenovus for the first time on Friday since its merger with Husky was announced.
“To me it’s a case of trying to ascertain what’s their aspirations to this merger, how do we fit into their big picture,” said Parsons.
Meanwhile, Opposition leader Ches Crosbie says if he were meeting with Cenovus he would be looking for a promise that the stalled West White Rose project would be going ahead, and if the company has plans for Husky’s east coast assets.
“I think that question is up in the air,” said Crosbie.
According to Equinor’s website, an investment decision on Bay du Nord could be made in 2021, with first oil to be produced in 2025 using a floating, production, storage and offloading vessel similar to the Terra Nova FPSO and the SeaRose FPSO.
The Cappahayden and Cambriol discoveries are close enough to the Bay du Nord field to be connected by what’s known as a subsea drill centre to an FPSO, so insiders say this would improve the economics of the overall project.
If approved, a development in the Flemish Pass Basin would be the first deepwater oil producing field in offshore Newfoundland, and the first outside the legacy Jeanne d’Arc Basin, where the Hibernia, Terra Nova, White Rose and Hebron fields are located.
Equinor has said the Bay du Nord project could generate $3.5 billion in revenue for the Newfoundland and Labrador government.
Equinor has also said it plans to move its Alberta offices to Newfoundland and Labrador, but hasn’t said when that will be, or how many people will be involved.
Parsons said there will be more jobs in St. John’s as a result of the move.