A trio of major industry players has submitted the highest-ever bid for oil exploration rights in the Newfoundland offshore.
The partnership — comprising ExxonMobil Canada Ltd., Suncor Energy Inc. and ConocoPhillips Canada Resources Corp. — will pay $559 million for a 266,139-hectare parcel in the Flemish Pass.
"These new opportunities offshore Newfoundland and Labrador will build on our 17 years of success with Hibernia and the ongoing development at Hebron," ExxonMobil Canada said in a statement.
"We are excited to explore these new areas."
The parcel is located southwest of recent discoveries by Statoil at Mizzen, Harpoon and Bay du Nord.
Statoil has estimated that Mizzen contains between 100 million and 200 million barrels of recoverable oil, with another 300 million to 600 million barrels at Bay du Nord. Results for Harpoon have yet to be announced.
The Flemish Pass parcel was one of six up for grabs. The other five drew significantly lower bids.
ExxonMobil snagged a parcel in the the Jeanne d’Arc basin for $16.7 million. It is adjacent to the area of the Hibernia production licence.
ExxonMobil and Suncor bid $21 million for one of four parcels on offer in the Carson Basin, farther south.
The three other Carson Basin properties attracted no bids.The minimum bid for each parcel was $10 million.
The Canada-Newfoundland and Labrador Offshore Petroleum Board released the results Friday afternoon.
Licences issued for 9 years
Exploration licences are issued for a nine-year period.
According to the C-NLOPB, the sole criterion for selecting winning bids is the total amount of money the bidder commits to spend on exploration of the respective parcel during the first six years.
That time frame can be extended, although penalties apply. Those escalate from $5 million for the first one-year extension to $15 million for the third one-year extension.
The largest amount bid to date in the Newfoundland offshore was a total of $672.7 million for 14 parcels and eight licences issued in the Orphan Basin in 2003.
The Flemish Pass bid announced Friday nearly matched that total for just one parcel.
ExxonMobil has a 40-per-cent stake in that Flemish Pass parcel, while Suncor and ConocoPhillips each have 30 per cent.
The Flemish Pass, which received the record exploration bid, represents a new frontier in the Newfoundland offshore. All of the current producing oil fields are located in the Jeanne d'Arc Basin.
Offshore oil vital to economy, treasury
The results provide a much-needed dose of good news for a jurisdiction feeling the pain of plunging oil prices.
Offshore oil accounts for about one-third of revenues for the Newfoundland and Labrador government.
Last month, as petroleum prices continued to plunge, Premier Paul Davis imposed restrictions on government travel and hiring. His government has delayed a fiscal update until next week.
On Friday, Brent crude — a close but not exact reference point for Newfoundland oil — was trading below $63 US a barrel.
The provincial government based its 2014-15 budget projections on Brent at $105 US a barrel. The price had spiked above $115 US as recently as June.
'I think we're in a renaissance of exploration.' - Jim Keating, Nalcor Energy Oil and Gas vice-president
According to Natural Resources Minister Derrick Dalley, the bid results demonstrate continued industry interest in the province's offshore resources.
“These results represent important investments by companies in our offshore and speak to industry’s confidence in the province’s prospective regions," Dalley said in an emailed statement.
"Exploration will help to sustain growth and development, while supporting long-term economic and employment opportunities for many Newfoundlanders and Labradorians.”
Meanwhile, Newfoundland and Labrador's Crown-owned energy company is pleased with the current bid results, and is eyeing the future.
"I think we're in a renaissance of exploration," said Nalcor Energy Oil and Gas vice-president Jim Keating.
"I believe with the six to eight wells that Statoil is drilling offshore, we're going to anxiously await those outcomes. Our focus now though is on the next land sale in 2015, where adjacent to this big bid on this licence and the the Bay de Nord discovery, we're going to have nine new licences come up, all encircling that area."