Deepwater oil potential puts offshore Nova Scotia on radar

As much as 8 Bbbl of oil and 121 Tcf of gas in place as well as a new southwestern deepwater oil play have been identified in a largely untapped 400,000-sq-km (154,440-sq-mile) area offshore Nova Scotia. Since 1967 the province has only drilled approximately 207 wells compared to more than 50,000 in the US Gulf of Mexico, according to the Nova Scotia Department of Energy.

An initial analysis by the Nova Scotia government found that while Atlantic Canada’s offshore petroleum geology is complex, involving higher exploration risk, Nova Scotia’s deepwater slope is analogous to other attractive oil-producing deepwater regions on the Atlantic Margin.

A play fairway analysis (PFA) devised by two consulting companies, RPS Energy and Beicip-Franlab of Paris, was concluded in 2011. The PFA indicated that rich prospectivity and resource potential exists in Nova Scotia’s underexplored offshore region, where the province is making headway in attracting interest through new geological ideas and exploration initiatives, said Sandy MacMullin, executive director, Petroleum Resources, Nova Scotia Department of Energy. To date, the PFA modeling has suggested approximately 1 Tboe have been generated by the region’s prolific source rocks.

Atlantic Canada attracts

In June 2011 the first post-PFA call for bids comprising eight deepwater parcels was issued by the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB), an independent joint agency for the Canada and Nova Scotia governments that regulates petroleum activities offshore Nova Scotia. In that round, Shell Canada Ltd. placed a record US $970 million in work expenditures for four deepwater parcels over six years – the largest exploration bid in eastern Canada and the third largest bid in offshore and northern Canada. Furthering efforts to attract oil majors to the province, the CNSOPB issued Call for Bids NS12-1 in April 2012 – the largest amount of acreage issued in a competitive call in the province’s history. This latest call for exploration rights consists of 11 offshore parcels prospective for oil and gas covering 7.6 million acres. Six parcels are included that have been nominated by the industry, and nine of the parcels are in deep water. Also included are sites near ExxonMobil’s Sable gas project and Encana’s Deep Panuke gas project. Additionally, the PFA basin resource calculation has predicted:

A major gas province with multi-Tcf potential lies to the south and southeast of the Sable sub-basin that was proven by the Annapolis gas discovery in 2002;

The Upper Jurassic and Lower Cretaceous deltas are prospective for yet-to-find resources in the Sable sub-basin near existing infrastructure;

The rim of the shallow-water segment of the Sable delta system contains significant and proven oil potential; and

The Baccaro carbonate bank forms an attractive petroleum system north and west of Sable Island. The bid due date is Nov. 7, 2012.

The call area in NS12-1 includes the highly prospective oil and gas province offshore Nova Scotia containing the Sable Offshore Energy Project and Deep Panuke, two offsetting production projects. Deep Panuke is expected to come onstream by year-end 2012 at a rate of 300 MMcf/d to 500 MMcf/d. (Image courtesy of the Nova Scotia Department of Energy)

A new narrative about oil

According to MacMullin, over the last three years the province has invested more than $15 million in the Offshore Energy Technology Research (OETR) Association to conduct research and analysis to map the petroleum geology of these potential oil and gas play fairways. Last year’s Call for Bids NS11-1 shifted focus toward Nova Scotia’s oil potential despite industry perception that the offshore area is geologically risky and gas-prone, with limited potential and a high-cost operating environment, he said. In 2011, the government conducted a series of meetings with major oil companies across the globe, including several national oil companies.

“Some of the companies said to us, ‘We aren’t really interested in gas,’ and I think that’s largely driven by the bubble of gas that exists in the US, shale gas primarily,” MacMullin said.

Using data gathered in the PFA, a new geological picture of a hydrocarbon deepwater play with a new source rock emerged. MacMullin said the source rock, which the Department of Energy believes was deposited nearly 200 million years ago when Morocco was beginning to separate from Nova Scotia, is widespread across its shelf and could have developed into a world-class petroleum system.

“There are a number of ways we have assessed the potential of this Jurassic source rock, not the least of which is the geochemical work we commissioned, both in oils found offshore Nova Scotia through seeps and fluid inclusion work, and through our condensates that we have sampled and cross-referenced to the oils found offshore Morocco,” he explained. “We think that with modern 3-D seismic and new attribute analysis work, you should be able to map the channels into deep water and follow the channels to where turbidite sands were deposited.”

According to MacMullin, the existence of a prime Jurassic source rock was not given much credence when targeting initial drilling prospects. “We have now postulated that this very organic source rock occurred during an early Jurassic period with a very shallow marine environment that allowed local deposition of rich organic shales. What we’ve concluded is that even though we haven’t penetrated early-Jurassic source rock in offshore Nova Scotia, it should be there.”

With long-term natural gas projects targeting LNG export to European and Asian markets, offshore Canadian gas should not be overlooked. MacMullin agreed natural gas is expected to play an important role in Nova Scotia, particularly as it moves away from coal, which comprises the bulk of the province’s generated power today. However, short-term exploration thinking, he said, is trending toward oil.

“If it’s not an offshore oil story, it’s not going to get a lot of attention,” MacMullin said, “which is why our first post-PFA call for bids focused on testing a deepwater oil play, and the current call for bids includes four parcels in what we believe to be an oil-prone region.”

Safety emphasis favors majors

Improving offshore safety since Macondo has become a worldwide precautionary measure. MacMullin said Nova Scotia adheres to Canada’s overall high safety standards, and the province has a strong regulatory process that has made safety and environmental protection key priorities.

For example, companies must demonstrate having experience safely drilling in more than 800 m (2,625 ft) water depth in the last 10 years to be considered eligible to win deepwater exploration rights in offshore Nova Scotia. “Since our PFA has a lot of substance and credibility to it, we no longer need to continue trying to appeal to the deepwater entrepreneur as we have been able to do a lot of derisking of the petroleum geology to a point where supermajor interest has been reestablished,” he said.

“The biggest issues in terms of an operator looking to pick up a parcel offshore [Nova Scotia] are, ‘Do I believe an oil story is there?’ and ‘Am I prepared to take that risk?’”

For more information, visit cnsopb.ns.ca and offshoreno? vascotia.com? .