Nfld. & Labrador

Chinese oil company announces delay of Flemish Pass drilling campaign

In another blow to Newfoundland and Labrador's offshore oil industry, an exploration drilling campaign planned this year for the Flemish Pass has been delayed because of the global pandemic.

Company says it 'cannot safely execute' exploration because of COVID-19 pandemic

The oil drilling ship Stena IceMax is under contract to CNOOC International to carry out an exploration campaign in the Flemish Pass. However, CNOOC has announced it is delaying the project because of the COVID-19 pandemic. (Kongsberg Maritime AS)

In another blow to Newfoundland and Labrador's offshore oil industry, an exploration drilling campaign planned this year for the Flemish Pass has been delayed because of the global pandemic.

That's a setback for an industry hoping to expand the province's oil industry into a new, deepwater basin.

In a statement to CBC News, CNOOC International confirmed that plans to drill what's known as the Pelles well has been delayed.

"We have concluded that given that we are in the early stages of our exploration program, we cannot safely execute offshore in Atlantic Canada in the near term due to the COVID-19 pandemic," the statement reads.

Spain battling a severe outbreak

The COVID-19 crisis in Europe is a big factor in the decision.

That's because the drill ship Stena IceMax is in Spain, and it cannot sail for Newfoundland, said Natural Resources Minister Siobhan Coady.

"It would have to come across the ocean into Newfoundland and Labrador waters and that is not permissible at the time because of the COVID situation," said Coady.

Natural Resources Minister Siobhan Coady says the IceMax can't sail into Newfoundland and Labrador waters because of the COVID-19 pandemic. (Terry Roberts/CBC)

The IceMax recently underwent a workover in a Spanish shipyard, and was scheduled to start drilling the Pelles A-71 location in early April.

But Spain is battling a severe outbreak of COVID-19, with hundreds of its citizens dying daily.

The IceMax is also crewed by an international contingent of specialists, and sailing into Canadian waters during a pandemic is not a good idea, said Coady.

So the three wildcat wells planned for this year — at a reported day rate of $299,000 — are now on hold but CNOOC says it remains committed to the campaign, and this is a delay.

Coady says she believes the current wave of bad news will soon end. 

"I guess I'm cautiously optimistic that once we are through this pandemic, things will come back and surge again," she said.

Bay du Nord not dead, says Coady

The decision follows a similar move by Equinor and its partners to defer the Bay du Nord project, also located in the Flemish Pass.

Equinor cited plummeting oil prices in its decision, but Coady is also confident that it will eventually get the green light.

"They still have their project team together, and are still working to advance it," she said.

Meanwhile, two other drilling campaigns are either underway, or are about to begin.

Coady said ExxonMobil is continuing its drilling work, while she's confident Equinor will proceed with its own campaign, with a drill rig anchored in Bay Bulls.

CNOOC — which stands for China National Offshore Oil Corporation — did not reference challenging market conditions in its statement, and CBC has requested more information from the company.

"Like all organizations, we continue to respond to the evolving COVID-19 crisis. Maintaining the safety and well-being of our workforce remains our top priority," CNOOC wrote.

The company called the decision to delay its drilling campaign "difficult but necessary."

However, the company said it remains "fully committed to Newfoundland and Labrador."

"We continue to assess appropriate timing and next steps to safely execute our exploration program in the Flemish Pass," reads the statement.

CNOOC is one of the largest national oil companies in China.

The Stena IceMax drill ship contracted to carry out its drilling campaign has never operated in Newfoundland's offshore, but has worked for Shell Canada in Nova Scotia's offshore.

CBC has learned that workers began receiving messages early this morning, saying the exploration campaign was being postponed.

"CNOOC had mobilized people from all over the world for this project and now they are at a standstill," said a source close to the project.

Read more from CBC Newfoundland and Labrador

About the Author

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

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