Statoil VP sounds cautiously optimistic tone over Bay du Nord potential
Jez Averty says great challenges ahead, but Statoil excited by success to date
A vice-president with oil giant Statoil says the company is excited about the potential for production in the Flemish Pass Basin, including the 2013 Bay du Nord find, but cautioned that many challenges will have to be overcome, including oceans depths, distance, logistics and harsh weather conditions.
Jez Averty said any potential agreement with the Newfoundland and Labrador government to develop the field should consider these unique challenges.
"Neither Bay du Nord development or continued exploration will be a walk in the park. It's not business as usual for the industry or the province," Jez Averty told delegates attending an oil and gas industry conference in St. John's Wednesday.
Averty responded to an announcement Tuesday by Premier Paul Davis that a so-called term sheet relating to equity, benefits and other fiscal terms is just weeks away.
Averty would not put a timeline on any business arrangement with the province, saying any such undertaking is a marathon, not a sprint.
"Statoil looks forward to continuing that dialogue. We are committed to partnering for success so we can deliver this together," he said.
A new frontier
The Bay du Nord find is located in 1,100 metres of water in what's being described as a new frontier of exploration in offshore Newfoundland and Labrador. It is located about 500 kilometres northeast of St. John's.
The company estimates that Bay du Nord holds up to 600-million barrels of recoverable light sweet oil, with exploration scheduled to continue into 2016.
Davis has described Bay du Nord as the largest find of conventional oil in the world.
But Averty emphasized the challenges, noting that drilling was interrupted for six weeks in March because of heavy sea ice.
He said a helicopter flew to the West Hercules drill rig in November "laden" with only three passengers, well below its normal complement because of the long distance.
As such, he said operational, logistical and weather challenges all have to be carefully considered in any decision to move forward.
And in a nod to the ongoing talks with the province, he said the typical playbook for past development agreements on shallow water projects such as Hibernia, Terra Nova and White Rose may also have to be rewritten.
"We are proud of what we have achieved. We are excited by the success we have had. But we are also acutely aware of the challenges that lie in front of us if we are to deliver on the promise of Flemish Pass," he said.
Oil industry still reeling
He said it's also a challenging time for the oil industry, which is still reeling from a price collapse that began in mid-2014.
Some analysts have estimated that $200 billion of capital investment has been postponed or cancelled worldwide since last year. Averty said the Flemish Pass is in a "global fight for capital where only the most competitive projects win."
Averty cautioned tapping into the potential of the Flemish Pass will only happen if all parties, including Statoil, the provincial government, regulators and suppliers come to the table with smart and innovative solutions.
"The pass stands at a crossroads," he said.
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