Nfld. & Labrador

Equinor plays down report of new oil discovery, saying it's too early to speculate

There's cautious optimism among those in the Newfoundland and Labrador offshore oil sector about a potential new discovery, but the company at the centre of it all is low-key about the situation.

Oil publication reports 'potentially commercial discovery' in Flemish Pass

The semi-submersible drilling rig Transocean Barents is seen at Bay Bulls, on Newfoundland's Southern Shore, in March 2020. The rig is now drilling in the Flemish Pass for Equinor and its partners. (Submitted by Neville Webb)

A report this week in the oil and gas trade publication Upstream has stoked some optimism in the Newfoundland and Labrador oil and gas sector, with a description of another "potentially commercial discovery" in the Flemish Pass Basin.

This is raising hopes that the stalled Bay du Nord project, which was deferred earlier this year because of low oil prices, could soon be resurrected.

Upstream, quoting industry sources, is reporting that the drill rig Transocean Barents has discovered oil in the Cappahayden K-47 exploration well, just 17 kilometres west of the Bay du Nord field, in exploration licence 1156.

Drilling began in late April, at the same time as the province's oil sector was being battered by a series of punishing announcements about cost-cutting and project deferrals or cancellations because of the global pandemic, and the resulting collapse in demand for transportation fuels.

The well is close enough to the Bay du Nord field to be connected —via a subsea drill centre — to a proposed floating production, storage and offloading vessel that Equinor hopes to build for the project, .

Equinor is downplaying media reports that it has made 'a potentially commercial discovery' of oil with its Cappahayden K-67 wildcat in the Flemish Pass. The well is being drilled in exploration licence number EL 1156, to the west of a series of other discoveries, including Bay du Nord. (Equinor)

If the drilling reveals a sizeable reservoir, that could improve the economics of the project, which is currently estimated at 300 million barrels of oil, and considered marginal because of its distance from St. John's, and the extreme water depths and harsh conditions.

'Hopeful for positive outcome'

But Equinor is cautioning against any premature celebrations.

The company is not confirming any discovery, and makes a point of saying the Upstream report is based on information from anonymous sources.

A spokesperson did confirm that the Barents is now doing what's called a "sidetrack" on the well, which is a secondary wellbore away from the original hole, with a source telling CBC News this is likely being done to "determine the extent of the reservoir," or search for a new target.

In its statement, Equinor said it is "hopeful for a positive outcome," but "operations continue on that well and it is too early to speculate."

Meanwhile, the Barents is scheduled to drill a second exploratory well in the same licence area called Cambriol G-92, and insiders are upbeat about this one, calling it "a bigger prospect" than Cappahayden.

Equinor has confirmed both prospects "could be considered tie-backs to Bay du Nord."

Economics of project could improve

Companies typically develop pre-drill estimates of oil reserves before a well is started, but those numbers are carefully guarded. 

If the Bay du Nord oil find in Newfoundland's offshore is developed by Equinor and its partner, Husky Energy, the companies will use a floating production, storage and offloading vessel like the one pictured in this rendering. (Equinor)

But insiders say if Cappahayden were to include 50 million barrels of oil, it would significantly improve the economics of Bay du Nord. And a similar or bigger discovery at Cambriol G-92 would also improve the business case.

With oil prices collapsing, Equinor announced in March that it was deferring the Bay du Nord project, which would be the province's first deepwater oil producing field, and the first outside of the Jeanne d'Arc Basin.

When the project was announced in late 2019, Equinor estimated it would cost nearly $7 billion to bring the Bay du Nord project into production, but the company is now looking at ways to lower development and operations costs.

An investment decision on the project is not expected now until sometime next year, with first-oil proposed for 2025.

Coady 'very hopeful' that report is accurate

Meanwhile, Equinor and its partner, Husky Energy, are continuing planning work on the project.

The Bay du Nord project is located in the Flemish Pass 500 kilometres east of St. John’s, with recoverable reserves estimated to be about 300 million barrels of oil. (Equinor)

When asked about the possibility of a new discovery Thursday, Natural Resources Minister Siobhan Coady said her only information came from the Upstream report.

But she's encouraged by the news, and is not surprised, saying seismic and other geoscience investigations have revealed the likelihood of 52 billion barrels of oil in the province's offshore.

"I'm very hopeful that Equinor has made that discovery and there is either the potential of a tieback or standalone discovery. I'm hopeful, but there's no validation of that at this point," she said.

Equinor said it will not provide details of the drilling campaign until both wells are completed.

Meanwhile, Equinor is not planning any activity on two other prospects in EL 1156 known as Sitka O-2 and Bakeapple M-35.

"There are no plans at this time to undertake any other drilling operations," an Equinor official said in a statement.

Read more from CBC Newfoundland and Labrador

About the Author

Terry Roberts is a journalist with CBC's bureau in St. John's.

Add some “good” to your morning and evening.

A variety of newsletters you'll love, delivered straight to you.

Sign up now

Comments

To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.

now