Oil prospect off Newfoundland faces 'harsh realities:' Statoil official

ST. JOHN’S, N.L. – Jez Averty does not sound like an oil executive who expects a term sheet any time soon for developing what has been touted as Newfoundland’s next big offshore site.

In a speech Wednesday punctuated with bleak detail on how the price crash has knee-capped the industry, the vice-president of North American exploration for Statoil ASA offered only the most cautious optimism.

Development of the remote Bay du Nord site faces “harsh realities” in a climate that is not business as usual, he told the Newfoundland and Labrador Oil and Gas Industries Association conference.

Only the most competitive projects will attract evaporating investment dollars, he stressed.

“It is not a walk in the park.”

Bay du Nord can be a winner, he said, but it will take co-operation among all industry players and “collaborative relations” with regulators. The Norwegian-based company is committed to continuing those talks but Averty offered no hint that a deal is imminent.

Premier Paul Davis said Tuesday he’s optimistic a term sheet to develop Bay du Nord can be reached “in coming weeks.”

The parcel in the Flemish Pass about 500 kilometres east of St. John’s lies in more than 1,100 metres of water. It was billed as the largest global find in 2013 with an estimated 600 million barrels of recoverable light crude.

Statoil spokesman Knut Rostad said in a December interview that Newfoundland is a major exploration focus but that any decision on development of Bay du Nord was likely months or years off.

An estimated US$200 billion of investment capital has been cancelled or postponed since oil prices plunged by almost half over the last year to hover around US$64 a barrel, Averty said.

He would only say the company looks forward to reaching the best deal possible when asked in an interview if a term sheet is realistic in the weeks ahead. Averty did not answer directly when asked if the premier’s talk of a coming announcement surprised him.

He confirmed that Statoil’s exploration drilling program in the region is not expected to finish until next May.

Robert Cadigan, president and CEO of the Newfoundland and Labrador Oil and Gas Industries Association, said estimating an oil price that might make Bay du Nord economically viable is a complex process. He did not have a figure to offer reporters, but said costs to operate what would be the most remote offshore site in the world would run high.

“We can’t really comment on whether a term sheet is possible. But certainly they’ve got a lot of work to do before they get to a point where they know they’ve got a commercial development,” he said of Statoil.

Davis said Tuesday he won’t rush any talks to score political points ahead of a provincial election Nov. 30. But with his Progressive Conservatives fighting to reverse dismal poll results, Opposition Liberal Leader Dwight Ball said Tuesday the premier is grasping at any potential good news.

Ball said in the legislature that Davis has “deal fever” and asked if he’ll fast-track a Bay du Nord term sheet in time for the fall campaign.

Davis said there will be no agreement unless it’s in the province’s best interests, including a possible equity stake.

Follow @suebailey on Twitter.