Two energy giants are setting an ambitious plan to explore for oil and natural gas in Arctic waters this summer, moving forward just a month after Canada's energy regulator revamped drilling rules to give companies an alternative to strict guidelines governing activity in the icy north.
Chevron Corp. has formed a partnership with Norway's Statoil ASA in Canada's Beaufort Sea, with designs on launching a 3-D seismic program covering a 2,060-square-kilometre area.
The joint venture, announced Thursday, came as the pair also joined hands with Spain's Repsol YPF SA on two other projects off the shore of Newfoundland and Labrador.
The deals demonstrate the companies' faith in Canada's offshore reserves, in prospective but technically challenging areas.
The Arctic partnership signals that should Chevron and Statoil find oil and gas in the Beaufort Sea, they are confident that they can draw up drilling plans that will satisfy the National Energy Board's demanding standards. In December, the NEB responded to industry complaints that existing rules make drilling impossible in the Arctic by allowing companies to present possible alternative methods to prevent environmental damage by a spill.
"Statoil has, for a long time, realized that the Arctic holds a significant part of the remaining resources," said Geir Richardsen, Statoil's vice-president of exploration in Canada. "That is why we saw this as a very good opportunity.
"We will follow any regulations which will come up, and work from that," he said in an interview. "We hope there will be a resolution of this."
To drill in the Arctic waters, companies must be able to complete a so-called relief well in the same season that they drill the exploration well, in order to cap any potential leak before it spews all through the long winter when ice conditions makes such well shutdown operations impossible. Faced with industry complaints that the same-season-relief-well requirement is virtually impossible to meet, the board said companies can proceed if they have an alternative that is clearly as effective.
Chevron will serve as the operator in the Beaufort Sea joint venture, controlling 60 per cent of the project. It previously controlled the entire lease. Statoil's 40 per cent stake is thanks to a farm-out deal, Chevron said.
Meanwhile, Chevron, Statoil and Repsol struck two deals tied to projects off Canada's east coast. Statoil and Repsol will join Chevron in a planned well in the Orphan basin. Previously, Chevron was partnered with Royal Dutch Shell PLC, Imperial Oil and Exxon Mobil Corp. on this well.
Pius Rolheiser, a spokesperson for Imperial, which is controlled by Exxon, would not pinpoint why the two companies left the project, but said: "Imperial continually reviews all assets for their contribution to the company's operating needs and financial objectives, as well as their potential value to others." A Shell spokesperson echoed these remarks.
Chevron, Shell, Imperial and Exxon previously drilled two wells in the Orphan basin. One turned out to be a so-called "dry hole," and the group has not disclosed the results of the other well, noted Leif Sollid, a Chevron spokesperson in Calgary.
Repsol spokesperson Kristian Rix said one dry hole does not mean the lease will turn out to be a dud.
The average success rate for offshore wells around the world is about 20 per cent, he said. "Based on those statistics, one well is actually more likely to be unsuccessful than successful ... One well is not enough evidence to doubt the play."
The new partners plan to drill the well this year, following regulatory approvals.
Further, the trio also revealed that they have been awarded two exploration parcels in the Flemish Pass basin, about 400 kilometres east of St. John's.
Chevron, Statoil and Repsol would not reveal the value of any of Thursday's deals. All three hold stakes in other properties off Canada's east coast.
With files from reporter Shawn McCarthy in Ottawa