Statoil sees Bay du Nord development in its future

A new Statoil drilling program in the Flemish Passis creating a sense of optimism in the Newfoundland and Labrador offshore industry.

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Alongside an announcementthat the company was moving ahead with two new exploratory wells, Tuesday brought one more piece of evidence of further development: shout-outs to the Bay du Nord discovery in a presentation to market analysts.

The drilling program will start in the middle of the year. It will explore the area near the Bay du Nord find, and will likely provide some short-term work for hundreds of workers in the oil and gas sector.

But some consultants and insiders are thinking long term.

"Statoil has been very bullish on this area for many years," wrote Terry Childs, a director with the industry website Rigzone.

"The fact that they are continuing to appraise the area tells me there is definitely something there and that they are trying to determine the limits of the field."

Robert Cadigan, the head of Newfoundland and Labrador's Oil and Gas IndustriesAssociation (NOIA), saidthe drilling announcement is a sign that Newfoundland is still a priority for Statoil and shows they're trying to move quickly, as Statoil has submitted an environmental application for further possible drilling after 2018.

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"This is really good news for our industry, the two wells alone, the drilling program, will create some activity," he said.

On Tuesday, company executives gave a presentation to analysts in London, and listed Bay du Nordamong future plans in their "next-generation portfolio."

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The potential project was one of the ones listed for possible start-up after 2022.

Long distance drilling

All of Newfoundland and Labrador's producing oilfields are found in the Jeanne d'Arc basin. The Flemish Pass, including Bay du Nord, is further east and in significantly deeper water.

According to Rob Strong, a consultant in the oil and gas industry, that will present some challenges

The further distance means helicopters can't transport as many passengers, he said, which could mean more runs. Supply ships also have to travel further.

"The deep water is not really a challenge, but it's the other logisticalimplications that add up to make it a costly area," he said.

But he added that if Statoil knows about the extra challenges, and is still interested in the area, it's a good sign they're serious.

Both Strong and Cadigan say what the provincial sector needs is activity in the short term.

There'slong-term potential, according to Strong, but with the Hebron platform moving out to sea this year, there soon won't be very much activity for construction and supply.

"Our members need the business opportunity, we have a lot of engineers and technologists that have been laid off in the downturn," addedCadigan.

"We need to keep those people here and employed to support the next wave of activity."

Reaping the benefits

Cadiganfigures that Statoil drilling close to their previous Bay du Nordexplorations means the company is likely considering whether it will find new oil to tie back to a centralized Bay du Nord structure.

The oil and gas sector has taken a hit, and Cadigan saida recovery could help the entire province, not just his industry membership.

"You have to remember, every dollar that oil and gas contributes in royalties to the province is a dollar that's available to spend on either health care, education or some of the many other needs that the province has," he said.

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