Macleans Article on Atlantic Canada"s Oil IndMaclean's February 12, 2001 Cover Dreams of Riches
Onshore energy reserves could brighten Atlantic Canada's
future
JOHN DEMONT in Souris
Robert Reid calls Fort St. John, B.C.,
home. But he is really one of those
restless nomads of the oilpatch. In
47 years in the drilling business, he
has gone wherever the action was --
Iraq, Pakistan, Bangladesh, the
United States, Guyana, Colombia --
and has the stories of hardship and
derring-do to prove it. Yet even Reid
is a bit surprised to find himself in
the winter of 2001 about 80 km east
of Charlottetown, hunting for natural
gas in the middle of potato country. At 64, he is just about ready to
pack it in and enjoy retirement. But his pulse still quickens when he
talks about the treasure that may be hidden below the Island soil.
"There are no guarantees in this business," Reid says, climbing the
steps up the 41-m-high drilling rig. "But if this comes in, things could
blow wide open around here."
Oilmen are by nature optimists. Until recently, most of their hopes for
the East Coast were focused beneath the chilly waters off
Newfoundland and Nova Scotia. There, mammoth oil and gas
reserves have already been found and the big petroleum companies
are committed to spending $1.5 billion more on exploration over the
next five years. Lately, though, the same breathless tones are
sneaking into conversations about onshore exploration: in western
Newfoundland, a St. John's-based company has applied to begin the
first oil production from an onshore well in the province's history, and
there is talk of another significant gas discovery nearby. A squad of
small drilling companies hopes to strike it big at promising sites in
central Nova Scotia and southeastern New Brunswick, as well as near
Souris on the eastern end of Prince Edward Island, where
Toronto-based Meteor Creek Resources Inc. boldly claims it has
found a field that could contain one trillion cubic feet of natural gas.
The big dreams do not stop there. Intrigued energy companies have
been snapping up drilling rights at an unprecedented rate throughout
Atlantic Canada. The land rush is greatest in Prince Edward Island,
where 405,000 of the island's 567,000 hectares are under lease to oil
companies, compared with just 81,000 hectares five years ago.
Exploration companies also hold the rights to drill on upwards of 1.6
million hectares in Nova Scotia, most of it acquired in the last five
years. As Jack MacDonald, a senior geologist with the Nova Scotia
Petroleum Directorate, puts it: "This is an extremely exciting time."
Nobody is going to confuse the East Coast with Alberta just yet. The
Canadian Association of Petroleum Producers figures that the
Western Canada Sedimentary Basin holds about twice as much oil
and gas as the east coast offshore. Yet the West's conventional
reserves are steadily dwindling and the region has been heavily
explored. The eastern figures, by comparison, do not even include the
potentially huge riches that may lie beneath the Atlantic Ocean, which
the big oil companies are only now about to explore. And the
possibility of inexpensive, easy-to-produce onshore production simply
seems one more signal that energy is Atlantic Canada's best hope for
a brighter future.
A few years ago, talk of bringing in an onshore gusher somewhere in
the region would have sounded downright delusional. What has
changed? Sky-high crude oil and natural gas prices are giving energy
companies an unprecedented ability to search for new reserves. As
well, some geologists think there is a connection between some of the
structures that contain offshore oil and gas reservoirs and onshore
energy pockets. The area's attractiveness has also soared because
of the new pipeline that started transporting natural gas from the Sable
Island field off the coast of Nova Scotia to the hungry New England
market a year ago. "It's early days yet," says John Richels, chief
executive officer of Calgary-based Northstar Energy Corp., which has
land leases for more than 809,000 hectares in Nova Scotia and plans
to drill at least two exploratory wells in 2001. "But the East Coast is
relatively unexplored and the geology indicates there's potential. It's a
natural place to look."
People are not counting their money just yet. Consider
Newfoundland's Port Au Port Peninsula -- now a mini-exploration hot
spot. Canadian Imperial Venture Corp., a St. John's-based junior
energy company, figures it has found a field there that could hold
recoverable reserves of 70 to 130 million barrels of oil. Nearby, two
other companies, Vulcan Minerals Inc., based in St. John's, and
American Reserve Energy Corp., out of Oklahoma, are also trying to
hit it big. And 130 km northeast, Deer Lake Oil and Gas Inc., whose
president is well-known Newfoundland lawyer and political adviser
Cabot Martin, has also found gas and condensate. Local businesses,
however, are waiting for tangible results. "We wish them well," says
Peter Fenwick, a newspaper commentator and broadcaster, who
owns a bed-and-breakfast a few hundred metres from the Canadian
Venture well. "But for now, no one is making any business decisions in
anticipation of them hitting it big."
Atlantic Canadians do not have to look far to see what a difference a
few petroleum finds can make. Offshore energy is the main reason
Newfoundland is expected to be among the fastest-growing provinces
in Canada this year and next, and the Nova Scotia government can
confidently brag that it will achieve "have" province status within the
next 10 years.
On Newfoundland's Grand Banks, the Hibernia field, which began
producing in 1997, continues to pump 150,000 barrels a day. Nearby,
the Terra Nova field is expected to add another 100,000 to 150,000
barrels a day once production begins this spring. Just last month,
Husky Oil Operations Ltd. and its partners filed an application to
develop the White Rose field, also on the Grand Banks, which is
estimated to contain some 230 million barrels. This year, a consortium
led by Chevron Canada Resources will also decide whether to
develop the 350 million barrel Hebron field, which could push overall
production from the Grand Banks up to 500,000 barrels per day.
The waters off Nova Scotia also hold lots of excitement. Among the
biggest questions for 2001 is whether ExxonMobil Corp. and its
partners will decide to add another Sable Island field to its existing
offshore gas production platform, which is already pumping nearly 500
million cubic feet of natural gas each day. And by the end of March,
PanCanadian Petroleum Ltd. will likely know whether the Deep
Panuke field, thought to contain 1.5 trillion cubic feet of natural gas, is
commercially viable. That could spark a whole new bout of exploration
in deeper waters once viewed as unpromising. "The East Coast's oil
and gas potential is considered to be virtually untapped," says Larry
LeBlanc, PanCanadian's vice-president, east coast operations. "It is
now a key player in this global industry."
Not everyone welcomes the drilling rigs. In November, actor Alan
Arkin, rocker Patti Smith, photographer Annie Liebowitz and dozens
of other international celebrities joined a coalition of fishermen,
natives and environmentalists in convincing Ottawa to prevent
Halifax-based Corridor Resources Inc. from exploring for gas off the
coast of Cape Breton until public hearings were held into the matter.
The spate of onshore drilling also worries environmental groups such
as Prince Edward Island's Earth Action, which has launched a
campaign to ban petroleum exploration. For now, however, there's
more g