Does the Flemish Pass hold the future of offshore oil?

It's a long way to go. The water is deep, the weather gets nasty, and the icebergs are huge.

But there's still hope that the stretch of ocean known as the Flemish Pass Basin might be the site of a new offshore oil bonanza.

"We're eternal optimists," says Paul Fulton, Statoil's country president for Canada.

Norwegian company has been drilling there for years

The Norwegian oil giant has been drilling in the area for several years. It will sink two more exploratory wells this summer.

An estimated 300 to 600 million barrels of oil sit beneath the ocean floor out there. Bringing it to market would pose unprecedented challenges for the Newfoundland oil industry.

The most promising discovery in the area is the Bay du Nord well, about 500 kilometres east of St. John's. That's a three-hour helicopter ride, twice as long as it takes to reach currently operating oil fields like Hibernia, located in the Jeanne d'Arc Basin.

Distance adds to challenge

The Flemish Pass "would be the furthest offshore that Statoil has developed a project," said Fulton. "But we've been operating for 40 years in the Norwegian continental shelf, which has a lot of similar conditions."

"It adds to the cost, and to logistical challenges," said Paul Barnes of the Canadian Association of Petroleum Producers. "In helicopter transport, because you've got to go further, you have to take on extra fuel. It means you take less passengers.

"Sometimes helicopters stop on the current platforms in the Jeanne D'Arc Basinto take on extra fuel or drop off supplies."

The prospect of a longer commute in bad weather raises safety concerns, especially in a province that has known offshore helicopter tragedy.

"It's harsh conditions out there," said Fulton. "But we take this extremely seriously. This is what we do every day. We have many helicopter rides out on the Norwegian continental shelf. This is what we believe we're experts at."

Icebergs add to challenge

Icebergs are the greater concern, according to Barnes. "We'll need to provide an appropriate royalty regime or other fiscal measures to compete with jurisdictions that don't have ice challenges."

He says the industry is well-equipped to take on icebergs.

'There are a number of different elements. It's the quality of the reservoir, the type of oil, the water depth, the operating expenses.- Paul Fulton

"Iceberg management is quite frequent in the Jeanne d'Arc Basin. You can put a tow rope around it and try to change its trajectory away from the platform. Also, several of our supply vessels are equipped with water cannons for firefighting. Those cannons can be used to spray an iceberg to change its trajectory."

Statoil's last drilling program, which concluded two years ago, suggested that reserves in the Bay du Nord well are at the lower range of the 300- to 600-million-barrel estimate.

Fulton won't say how many barrels are required to make the field viable for development.

Company also has to predict future price

"Generally, the more the better. But there are a number of different elements. It's the quality of the reservoir, the type of oil, the water depth, the operating expenses. That's what we're working on at the moment, to try to understand how we can develop this profitably."

The company also has to make its best guess about where the price of oil might be by the time a new offshore field starts pumping product.

"That is the multibillion-dollar question," said Fulton. "That's one of the main challenges as an oil company, is to take a view on what the oil price is going to be in the second half of the next decade, in the 2020s.

"What we look for are projects that can be profitable both at a low and a high price. That's the focus for the industry these days, to develop projects with lower break-evens than you might have found a few years ago."