Boundary dispute settlement opens Canada's Laurentian subbasin to exploration

Settlement of a boundary dispute has opened the exploration door to the strongly prospective Laurentian subbasin off Canada's East Coast.

Jim Stott
Special Correspondent-Calgary

CALGARY, Aug. 5 -- Settlement of a boundary dispute has opened the exploration door to the strongly prospective Laurentian subbasin off Canada's East Coast.
But the actual start-up date of exploration activity will be determined by how long it takes to draft new regulations and complete negotiations between governments and companies that hold acreage under old federal permits.

The subbasin, west of the French islands of St. Pierre and Miquelon and off the southern tip of Newfoundland, has a postulated resource potential of 9 tcf of natural gas and 700 million bbl of crude oil.
Companies holding acreage in the region include Conoco Inc., ExxonMobil Corp., Imperial Oil Ltd., Kerr-McGee Corp., and Murphy Oil Co.

Steps to exploration
The process leading to exploration involves the transfer of federal permits in the basin to provincial exploration licenses under the jurisdiction of Nova Scotia and Newfoundland and Labrador.

Negotiations with existing permit-holders, or sale of any new parcels in the area, cannot begin until legislative action is taken to pass jurisdiction from Ottawa to the two provinces.
The legislative process is under way, but it is unclear how long it will take. A spokesman for Newfoundland and Labrador said provincial officials have expressed concern about how long it could take and estimates by various parties have ranged from 6 months to 2 years.

A lengthy boundary dispute between the two provinces was settled last April in a binding ruling by a federally appointed arbitrator.
The ruling awarded Newfoundland 75% of the 23,168 sq mile basin. Nova Scotia received jurisdiction over 16%. The remaining 9% is held by France, off that country's islands of St. Pierre and Miquelon.

Newfoundland Labrador Energy Minister Lloyd Matthews said the ruling is good for both provinces and the industry by providing jurisdictional certainty and by opening up the area to advanced exploration.

Gordon Balcer, Nova Scotia economic development minister, said the ruling provides clarity to industry and thaws an exploration chill that was affecting a huge portion of the offshore, not just the Laurentian basin.

Companies' exploration plans
A spokesman for Conoco Canada Inc., which holds 8 million gross acres, 4 million net, in the basin, says the company is waiting on discussions with the provincial offshore petroleum boards. Conoco's partners include Exxon-Mobil and Murphy.
Conoco Canada's Peter Hunt said the "starting gun has not yet gone off" on the permit conversion process, but the company hopes it will begin later this year.
Hunt said Conoco participated in the Bandol exploratory well, in French territory, in 2001 where Exxon-Mobil was operator. The test was a dry hole, and partners are now considering future plans.
Hunt said that most of Conoco acreage is in the region of the boundary dispute, where some 2D seismic has been shot, but 3D seismic is needed.
He said Conoco evaluates the basin as a seismically interesting area. He said it is a clearly prospective area, but is also high-risk, and there is a need to proceed cautiously.

A spokeswoman for Exxon-Mobil said that company is also waiting to work with the provincial boards to convert permits into exploration licenses. Exxon-Mobil has nine leases that will now fall in Newfoundland territory.
Margot Bruce-O'Connell said the company is awaiting guidance from the Newfoundland board on when exploration license negotiations will begin and what process will be followed. She said the company will not discuss its plans for the region, because it is about to enter negotiations.
Bruce-O'Connell said the company sees the basin as a high-risk, high-cost exploration area that will require significant discoveries to achieve commercial development.

Kerr-McGee says it is considering a start to exploration in the area in 2003. It holds licenses totaling about 3.2 million acres and is operator for seven deepwater blocks, with interests ranging from 50% to 100%.
Kerr McGee has one 732,400 acre lease on the Nova Scotia side that will be affected by the boundary ruling.
A Nova Scotia spokesman said a work commitment of only about $13 million (Canadian). would be affected, compared with total work commitments in all offshore areas of more than $1.5 billion.

Lease sale
The Canada-Newfoundland Offshore Petroleum Board earlier this year deferred its 2002 offshore land sale, giving the boundary ruling as one of the reasons.
It also noted the industry is in transition, shifting to deeper waters and new basins with major interest-holders consolidating their portfolios.

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