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Featured Articles
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Feb 2006
| Source: Oilweek Magazine
| | | Nova Scotia nasties
| | | EnCana, Marauder come up dry at Dominion, but others still interested in Nova Scotia offshore
| | | By Andrea Lorenz
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| Striking a gusher in the Abenaki Reef formation offshore Nova Scotia has proved elusive for EnCana and its junior partner Marauder Resources, but the disappointment has not dimmed the enthusiasm of others waiting to drill in the area.
Among the first off the mark will be BEPCo Canada Inc., the Canadian subsidiary of a Fort Worth, Texas company owned by billionaire Perry R. Bass and his four sons.
BEPCo has completed its environmental assessment but it cannot drill until a rig becomes available. And exploration companies out West think they have it bad. "There are fewer rigs than there are prospects," said Neal Dawe, a spokesman for the Canada-Nova Scotia Offshore Petroleum Board.
BEPCo is in line for the Eirik Raude, a fifth generation semi-submersible which is currently under contract to ExxonMobil for future drilling in the Orphan Basin offshore Newfoundland. It is one of the few rigs that can operate during the winter in the ice-packed waters off Canada’s East Coast. BEPCo’s target, within the confines of EL 2407, lies in 1,200 metres of water southwest of Sable Island, directly south of Halifax.
In the mean time, EnCana (the operator) and Marauder have gone home to regroup and try to assess what went wrong. On Jan. 23, the partners announced disappointing results from their sidetrack well Dominion J-14A. The well was a second effort to tap into the Deep Panuke reservoir after their original well Dominion J-14 on the Grand Pre block turned out to be a dry hole.
The key question is how will the result impact negotiations between EnCana and the Nova Scotia Department of Energy over royalty payments and work commitments? Will the Board be more likely to offer terms that EnCana will consider acceptable than it would have been had the well been a gusher?
In late 2003, EnCana abruptly called a halt to its Deep Panuke regulatory process. It withdrew its development applications that it had filed in March 2002 with the National Energy Board and the C-NSOPB, saying its goal "was to strengthen the risk-adjusted project economics."
Given the painful cost of failure and the lure of other expensive projects, such as unconventional gas plays in the Rocky Mountains, will EnCana decide to drill off Sable Island again soon? Much depends on the outcome of its discussions with the Department of Energy.
"Everyone is waiting for the result of those negotiations," said Dawe. "Obviously a successful well would have made it a more appealing asset."
It was not just continuing high oil and gas prices but the success of two previous wells, Margaree and MarCoh that boosted EnCana’s confidence enough to join forces with Marauder and drill the Dominion J-14 well.
MarCoh, which is owned 24.5 per cent by EnCana, 51 per cent by ExxonMobil and 24.5 per cent by Shell Canada, is located 11 kilometres northeast of the Deep Panuke discovery. It encountered approximately 100 metres of gas bearing reservoir. Four kilometers south lies the Margaree well which was tested and flowed gas at a rate of more than 53 million cubic feet a day.
After reaching a total depth of 3,700 metres with nothing to show for its efforts at Dominion J-14, EnCana and Marauder chose the sidetrack option, a decision based largely on the success of two previous sidetracks in reaching Panuke’s gas bearing reservoir. Dominion J-14, which cost $30 million, was the seventh well to be drilled in the field located on the Grand Pre block 150 kilometres offshore Nova Scotia.
It was a costly venture for Marauder which paid 40 per cent of the original well to earn 20 per cent of the lease. It paid 20 per cent on the sidetrack well. Marauder’s deal with EnCana included the right to buy data.
The Abenaki carbonate platform is divided into three segments along the trend: Panuke, Acadia and Shelburne. The 120 kilometre long Panuke Segment lies adjacent to the Sable Sub-Basin, northeast of the larger Acadia Segment. The discovery itself has a gas bearing pay zone of about 70 metres. The field is a limestone carbonate bank. At the depths - 3,500 to 3,700 metres - at which the companies are drilling, the reservoir’s porosity is difficult to predict, said Jack MacDonald, a senior geologist with Nova Scotia’s Department of Energy.
On Dec. 28 last year, the companies announced that the Dominion J-14 well had reached total depth of 3,700 metres - the sidetrack was intended to tap a portion of the structure some 300 to 400 metres away from the J-14 bottom and cost just under $10 million to drill.
"If you fail, at least come in under-budget," remarked Marauder’s Vice President Jon Axford.
Will his company try again to strike gas in Deep Panuke? "Absolutely," assured Axford, whose father Don Axford was the godfather of offshore Nova Scotia exploration. "EnCana has five wells available to be licensed. One of those is on our land. It’s beside the biggest well in the pool, MarCoh."
Marauder’s management team members say they are ready to get right back on the high dive and try again.
"It was a good prospect. I’d do it all over again," says CEO Robert Shields. "We have to wait for EnCana to re-evaluate their 3-D seismic data. Until we find out what EnCana is going to do...we’ve got some other ideas."
This includes raising money from financial entities in London. His colleague John Milford confirmed that Marauder wants to increase its assets offshore Nova Scotia.
That never-give-up attitude would have made Don Axford proud. In 1959, the senior Axford became convinced that there must be a structural high offshore Nova Scotia where, as he wrote in his 1999 memoirs ,"buried Sable-like sands would make great Gulf Coast-like oil or gas reservoirs."
It took many hours of research on Don’s part to come up with the kind of hard evidence he needed to persuade his bosses at Mobil Oil to listen to him. Several months later, the information he needed finally turned up in the form of a refraction seismic line shot by the Lamont Geophysical Laboratory in Woods Hole, Massachusetts. That data defined three or four velocity layers, a deepening basin, a high at Sable and deeper sediments up to the shelf’s edge. It was enough to enable Axford to persuade Mobil’s management to invest in one million acres of exploration rights off Sable Island.
Mobil Canada drilled its first well on the Scotian Shelf in June 1967. The first offshore discovery was made at Sable Island in 1971. By 1998, exploration companies had made 22 significant discoveries, including two oil, two oil and gas and 18 natural gas discoveries. Thirty wells have been drilled on the Abenaki Platform itself.
Today, ExxonMobil is the largest producer offshore Nova Scotia. Its Sable Offshore Energy Project, which was Canada’s first commercial offshore natural gas development, currently produces over 400 million cubic feet of natural gas per day.
Although Don Axford passed away in 2005, his work and enthusiasm continue to influence explorers offshore Nova Scotia. It was a combination of his company Endless Energy and Nova Scotia Resources Ltd. that joined forces with Marauder to drill Dominion J-14. Jon Axford and Robert Shields are certain the prospect is worth drilling again. The first one seemed to have everything going for it. As Shields said, "I thought that with Don’s spirit behind us it would have been a no-brainer."
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