Ramform begins extensive survey of Newfoundland potential

The Ramform Explorer in St. John's harbor.

• The Grand Banks Blocks. [39194 bytes]

• Hebron/Ben Nevis Structure. [44119 bytes]

• Terra Nova Structure. [52353 bytes]

• Iceberg floats over the Whiterose Structure. [19700]

The delta-shaped seismic vessel, Ramform Explorer broke through pack ice and entered the harbor at St. John's, Newfoundland last month. The coming to Newfoundland of PGS's state-of-the-art Ramform marks the beginning of a new era in the region's petroleum industry. There to conduct a high-tech 3D seismic acquisition over virtually all of the most prospective area in the Jeanne d'Arc Basin, the survey is sponsored by a 10-company partnership comprised of Petro-Canada, Husky Oil, Mobil, Chevron, Gulf, Murphy, Talisman Norsk Hydro, Parex, and Mosbacher and is expected to take three to four months.

PGS Exploration's manager of marketing and sales, Kevin Stiver, says the Ramform's capabilities were why it was chosen to carry out the 1100 sq km acquisition, the largest seismic survey ever conducted off Canada. In particular, the Ramform's ultra-wide towing system designed to pull up to 12 streamers, and a fully automated streamer handling system, incredible stability even in heavy seas, as well as QC and real-time onboard processing were the deciding factors..

Ice-rated and well suited to the harsh Grand Banks environment, the Ramform will employ an eight-streamer configuration in this record shoot, taking advantage of the vessel's ability to acquire high levels of data in far less time and with fewer, if any, infills - essential do to the brief weather window on the Grand Banks.

Petro-Canada is supervising operations on the Terra Nova and Hebron/Ben Nevis licenses, while Husky Oil is supervising the shoot on Whiterose and the smaller Cape Race licenses. Total cost of the program is approximately US$10 million.

The Grand Banks

Charles J. Furey, Newfoundland and Labrador's minister of industry, trade and technology, estimates that the Grand Banks has recoverable reserves of 1.6 billion bbl oil, 4 tcf gas, and 237 million bbl natural gas liquids. In addition, he puts the yet-to-be-discovered reserves at 5 billion bbl oil, 53 tcf gas. He predicts that the province will be producing upwards of 400,000 b/d oil within seven years.

John Fitzgerald, acting chairman and chief executive of the Canada Newfoundland Offshore Petroleum Board, the provincial regulatory body, says this is definitely the beginning of a new, more dynamic phase in oil and gas activity in the area.

"Hibernia is a major milestone; it has kicked off our production era in a big way," he told Offshore, "but there is a series of other projects queuing up behind it and anxious to get into action. We anticipate that by fall the Terra Nova project will complete the regulatory review and get underway. The participants appear to be positioning themselves for a very quick move as soon as the results of the regulatory commission are had. Whiterose and Hebron are a bit farther back in the queue. The comprehensive seismic survey that's about to be done will include these structures, and, based on the results of the survey, they plan to do further delineation drilling, some extensive formation testing, and, next year, if the tests are encouraging, to move into a production phase as well, probably using a floating system similar to the one planned for Terra Nova.

"The Grand Banks is relatively lightly explored. There have been about 140 wells drilled off the east coast of Canada, and another 120 or so on the Scotian Shelf. It is a huge area, though lightly explored by any standard. The Jeanne d'Arc Basin where the Hibernia, Terra Nova, Whiterose, Hebron and Ben Nevis Fields are located, has been explored a little more thoroughly, but there's still lots of area for more work there."

The most frequently heard estimate of total reserves for the Grand Banks is 6 billion bbl, but that figure is derived from just those known structures in the Jeanne d'Arc Basin. Far more may lie in yet unexplored areas on the Banks. Fitzgerald believes as the present fields are developed and put on stream, other operators will be encouraged to further explorations, which should reveal additional billions of bbl oil and several more tcf of gas.

Amoco is set to drill the first new exploratory well on the Banks in five years, on the 300 million bbl West Bonne Bay Block, which is operated by Amoco (80%) and partners Petro-Canada and Norsk Hydro. Thereafter, in September, following the Ramform's 3D seismic shoot, Amoco will drill another well to delineate the extent of the Hebron structure on behalf of Petro-Canada (operator) and its partners Mobil, Chevron, and Norsk Hydro. Hebron is expected to contain 195 million bbl oil. The Sedco Forex seimsubmersible Bill Shoemaker will drill both wells.

Terra Nova

Terra Nova, however, will be the first, after Hibernia, to go into production. The field lies 35 km southeast of Hibernia and approximately 350 km from the Newfoundland coast in 90-100 meters water. Discovered in 1984 by Petro-Canada, the field tested 5,000-10,000 b/d oil from five delineation wells. the Canadian Newfoundland Offshore Petroleum Board currently estimates recoverable reserves at 406 million bbl of light, sweet crude oil, making it the second-largest field so far discovered off Canada's east coast. Operators estimate peak production will be 125,000 b/d from the East Flank and Graben structures alone. The Far East structure has not yet been drilled. The reservoir is a sequence of medium to course-grained Late Jurassic sandstones

Field development is anticipated to start before the end of this year, with production about July 2000. The Grand Banks Alliance, headed up by Brown & Root, is to lead a consortium contracted to carry out the field development at a cost of approximately $1.2 billion. Current plans call for a fast-track program of drilling more than 40 subsea wells in 10-meter-deep glory holes (to protect the subsea production equipment from iceberg scourges), which will produce to a steel-based monohull FPSO. The Terra Nova floating production system will operate year 'round, since it will be capable of avoiding ice and icebergs. Service vessels will be onhand to tow threatening icebergs away from the FPSO.

Terra Nova is owned by a consortium of Petro-Canada (operator), Mobil, Husky Oil, Norsk Hydro, Murphy Oil, and Mosbacher Operations. The Grand Banks Alliance is composeed of Halliburton Energy Services, FMC, Coflexip Stena Offshore, AGRA Shawmont Brown & Root, PCL Industrial Constructors, and Doris ConPro.

Whiterose

Whiterose was discovered in 1987 and tested 5,000 b/d oil and 4 million cf/d gas. Other delineation wells ranged from 900-3000 b/d oil and 10-25 million cf/d gas. The CNOPB estimates that the field contains oil reserves of approximately 200 million bbl and at least 1.5 tcf gas. Operator Husky Oil estimates that the field contains 250 million bbl oil and that it is capable of producing 75,000 b/d when its production starts, sometime between 2002-04.

Hebron/Ben Nevis

Hebron hasn't really been delineated, though estimates are that it is over 200 million bbl, but it still needs delineation. Some estimates place the field in the 400-700 million bbl category, which would make it comparable to Hibernia. Mobil, Chevron, Petro-Canada, and Norsk Hydro are the shareholders, with Mobil holding the majority share.

The field was discovered in 1981 by Petro-Canada, but at the time it was not considered economical to develop. Now, however, it is set on track for development, with PGS shooting 3D this summer and drilling of its first well this fall.

Chevron's spokesman C.R. Stewart stated that "There's real excitement that we can advance Hebron up a notch or two and actually begin to think about development plans which could see first production in about six years."

Amoco's West Bonne Bay well, to be drilled this month on Ben Nevis is a clear indication that that structure as well has a promising future. It had been little explored before now.

Generic royalty regime

"Terra Nova, in some ways, is more important than Hibernia, says Premier Brian Tobin, "because it is 100% private sector investment, without any government financial instruments, grants, or loans. As a government in the last year or so, we were able to move quickly to complete negotiations on Terra Nova and move on to a generic regime - to take a very business-like predictable approach to exploitation of our offshore reserves. The development of Hibernia and Terra Nova and our Offshore Generic Royalty Regime are causing a renewed interest in the Grand Banks."

The Offshore Generic Royalty Regime applies to all offshore discoveries except Hibernia and Terra Nova. It consists of a two-tiered net profits tax and basic royalty, which is a percentage of gross revenue to provide the government with a guaranteed level of revenue regardless of the profitability of the project. Incremental rates start at 1% and peak at 7.5% for field sizes greater than 250 million bbl. The net profit tax is 20% of net revenues after 12% rate of return is achieved on the unrecovered project costs and 10% of net after 22% of return has been achieved on unrecovered project costs.

"The regime is a profit-sensitive approach," says Tobin, "one that allows for simple payout for the return on capital investment by those who come and invest here. A simple payout quickly, one that provides for a share of revenues for the province based on profits - and our share of the revenues increases as the profits increase. A regime that seeks to the greatest extent possible to see Newfoundland and Labrador firms and workers participate in construction, development, and production, but on an internationally competitive basis. It is a 180-degree turn from the notion that the way you solve the problems of the economy is with a single project - instead it says we are interested in many projects, in building an industry - many fields in production at the same time to attract a nucleus here.

"We're quite excited. We're getting people coming in. In particular, we're getting a lot of interest in gas. We've got 8 tcf proven reserves of gas up there, 4 tcf on the Jeanne d'Arc Basin, another 4 tcf off Labrador."

Paul Adams, president of the Newfoundland Ocean Industries Association, says, "The single most positive step the government has taken was putting into place of the generic royalty regime. As an industry association, we were very active in lobbying the government to do that. It gives the producers and operators a comfortable ballpark in which they can play to make their investment decisions. It's not the only factor, but it is a very important issue. It's very competitive, about 67th out of 140 regimes around the world. Hibernia and Terra Nova have their own regimes, but all the others will be under the generic royalty regime. Fair and equitable for the province, reasonable for the operators, and competitive around the world. It livened up the activity that is going on right now.

"There are so many ongoing projects now planned in exploration or as potential construction, and even over on the west coast in the Port au Port area, that it's very encouraging and exciting to be around while its happening.

"Like many other areas of the world, as fields get developed, one by one, they provide the basic infrastructure so that the cost of the next project decreases. Technology is providing significant advances in respect to new drilling techniques, different types of field developments for marginal fields, so that the economics of developing a field become better. And we realize that we're on the world stage as opposed to being anything special, that we're competing for positive investment decisions by the major oil producers, and that we've got to become globally competitive. That's witnessed by some of the alliancing partnerships in place here. And it's also evident in the recent agreement between the construction unions in the province to form a single bargaining unit and to be very flexible toward their approach to work at Bull Arm. Those processes bode very well for our future.

"If you look at the North Sea and the way it was developed, you see similarities here. Hibernia and Ekofisk, for example. I don't know if we will reach the level of production that they have in the North Sea, but then, they didn't know at the beginning either.

"Mobil Oil has estimated Hebron at 700 million bbl, that's 40 million ahead of Hibernia, almost 300 million bbl ahead of Terra Nova's estimate. By 2002-2004, we could be producing 500,000 b/d or more.

"It is certainly happening. It will happen more quickly as we become more capable of being competitive, because we have all the tools to fuel the industry's growth, with respect to the government, the fiscal and royalty regimes, the conditions under which people come here to work, operate, the community can become more competitive, as we develop more expertise, we will become more efficient, the oil companies will learn to rely on us more, so they don't have to import. There's a period of confidence building, and I have no reluctance in saying that the engineering and technical abilities in this province are as good as anywhere else in the world.

"My view," says Brian Tobin, "is that the province is going through the most difficult period in our history, and that is related to a large degree to the collapse of the fishing industry in 1992. We're having a difficult time, but I think if you come back to this province after three or four years, you'll see that the last page of the chapter was written in 1997, and that chapter closed and a new chapter began. Because I'm absolutely confident that the impact of offshore oil and gas exploratory work, full cycle exploration, production, will be such that the impact on jobs and revenues will be quite dramatic - certainly by 2002-2003. It is not unreasonable to suggest that we are looking at an industry, now that it's kickstarted by Hibernia and Terra Nova that'll produce another project for development every two years.

The offshore here is still relatively unexplored. The success rate to the extent that we've drilled wells in the Jeanne d'Arc Basin is incredibly high, and we've barely touched the surface of what is available. Mobil knows it's got to invest here, Petro-Canada knows that, Husky Oil, Chevron, Murphy; all I say to those that have been reading about this exciting play, because it is dynamic and exciting, is that my door is always open. We're looking for people interested in further exploration - there's lots more acreage out there to look at - and we're looking people interested in natural gas development. It's a dynamic new environment - a province whose GNP growth rate in 10 years will lead the country, a province that will have clearly established itself as the next major play in the oil and gas sector in the North American continent. You'll have seen a significant expansion from Houston and from Calgary to St. John's. When you think of oil and gas on this continent, you'll think of these three centers."

Copyright 1997 Oil & Gas Journal. All Rights Reserved.