Cover

DREAMS OF RICHES

John DeMont February 12 2001
Cover

DREAMS OF RICHES

John DeMont February 12 2001

DREAMS OF RICHES

Cover

John DeMont

Robert Reid calls Fort St. John, B.C., home. But he is really one of those restless nomads of the oilpatch. In 47 years in the drilling business, he has gone wherever the action was—Iraq, Pakistan, Bangladesh, the United States, Guyana, Colombia—and has the stories of hardship and derring-do to prove it. Yet even Reid is a bit surprised to find himself in the winter of 2001 about 80 km east of Charlottetown, hunting for natural gas in the middle of potato country. At 64, he is just about ready to pack it in and enjoy retirement. But his pulse still quickens when he talks about the treasure that may be hidden below the Island soil. “There are no guarantees in this business,” Reid says, climbing the steps up the 41 -m-high drilling rig. “But if this comes in, things could blow wide open around here.”

Oilmen are by nature optimists. Until recently, most of their hopes for the East Coast were focused beneath the chilly waters off Newfoundland and Nova Scotia. There, mammoth oil and gas reserves have already been found and the big petroleum companies are committed to spending $1.5 billion more on exploration over the next five years. Lately, though, the same breathless tones are sneaking into conver-

sations about onshore exploration: in western Newfoundland, a St. Johns-based company has applied to begin the first oil production from an onshore well in the provinces history, and there is talk of another significant gas discovery nearby. A squad of small drilling companies hopes to strike it big at promising sites in central Nova Scotia and southeastern New Brunswick, as well as near Souris on the eastern end of Prince Edward Island, where Toronto-based Meteor Creek Resources Inc. boldly claims it has found a field that could contain one trillion cubic feet of natural gas. The big dreams do not stop there. Intrigued energy companies have been snapping up drilling rights at an unprecedented rate throughout Adantic Canada. The land rush is greatest in Prince Edward Island, where 405,000 of the island s 567,000 hectares are under lease to oil companies, compared with just 81,000 hectares five years ago. Exploration companies also hold the rights to drill on upwards of 1.6 million hectares in Nova Scotia, most of it acquired in the last five years. As Jack MacDonald, a senior geologist with the Nova Scotia Petroleum Directorate, puts it: “This is an extremely exciting time.”

Nobody is going to confuse the East Coast with Alberta

just yet. The Canadian Association of Petroleum Producers figures that the Western Canada Sedimentary Basin holds about twice as much oil and gas as the east coast offshore. Yet the Wests conventional reserves are steadily dwindling and the region has been heavily explored. The eastern figures, by comparison, do not even include the potentially huge riches that may lie beneath the Atlantic Ocean, which the big oil companies are only now about to explore. And the possibility of inexpensive, easy-to-produce onshore production simply seems one more signal that energy is Atlantic Canadas best hope for a brighter future.

A few years ago, talk of bringing in an onshore gusher somewhere in the region would have sounded downright delusional. What has changed? Skyhigh crude oil and natural gas prices are giving energy companies an unprecedented ability to search for new reserves. As well, some geologists think there is a connection between some of the structures that contain offshore oil and gas reservoirs and onshore energy pockets. The areas attractiveness has also soared because of the new pipeline that started transporting natural gas from the Sable Island field off the coast of Nova Scotia to the hungry New England market a year ago. “It’s early days yet,” says John Richels, chief executive officer of Calgary-based Northstar Energy Corp., which has land leases for more than 809,000 hectares in Nova Scotia and plans to drill at least two exploratory wells in 2001. “But the East Coast is relatively unexplored and the geology indicates there’s potential.

It’s a natural place to look.”

People are not counting their money just yet. Consider Newfoundland’s Port Au Port Peninsula—now a miniexploration hot spot. Canadian Imperial Venture Corp., a St. John’s-based junior energy company, figures it has found a field there that could hold recoverable reserves of 70 to 130 million barrels of oil. Nearby, two other companies, Vulcan Minerals Inc., based in St. Johns, and American Reserve Energy Corp., out of Oklahoma, are also trying to hit it big. And 130 km northeast, Deer Lake Oil and Gas Inc., whose president is well-known Newfoundland lawyer and political adviser Cabot Martin, has also found gas and condensate. Local businesses, however, are waiting for tangible results. “We wish them well,” says Peter Fenwick, a newspaper commentator and broadcaster, who owns a bed-and-breakfast a few hundred metres from the Canadian Venture well. “But for now, no one is making any business decisions in anticipation of them hitting it big.”

Atlantic Canadians do not have to look far to see what a

difference a few petroleum finds can make. Offshore energy is the main reason Newfoundland is expected to be among the fastest-growing provinces in Canada this year and next, and the Nova Scotia government can confidently brag that it will achieve “have” province status within the next 10 years.

On Newfoundland’s Grand Banks, the Hibernia field, which began producing in 1997, continues to pump 150,000 barrels a day. Nearby, the Terra Nova field is expected to add another 100,000 to 150,000 barrels a day once production begins this spring. Just last month, Husky Oil Operations Ltd. and its partners filed

an application to develop the White Rose field, also on the Grand Banks, which is estimated to contain some 230 million barrels. This year, a consortium led by Chevron Canada Resources will also decide whether to develop the 350 million barrel Hebron field, which could push overall production from the Grand Banks up to 500,000 barrels per day.

Onshore energy reserves could brighten Atlantic Canada’s future

The waters off Nova Scotia also hold lots of excitement. Among the biggest questions for 2001 is whether ExxonMobil Corp. and its partners will decide to add another Sable Island field to its existing offshore gas production platform, which is already pumping nearly 500 million cubic feet of natural gas each day. And by the end of March, PanCanadian Petroleum Ltd. will likely know whether the Deep Panuke field, thought to contain 1.5 trillion cubic feet of natural gas, is commercially viable. That could spark a whole new bout of exploration in deeper waters once viewed as unpromising. “The East Coast’s oil and gas potential is considered to be virtually untapped,” says Larry LeBlanc, PanCanadian’s

vice-president, east coast operations. “It is now a key player in this global industry.”

Not everyone welcomes the drilling rigs. In November, actor Alan Arkin, rocker Patti Smith, photographer Annie Liebowitz and dozens of other international celebrities joined a coalition of fishermen, natives and environmentalists in convincing Ottawa to prevent Halifax-based Corridor Resources Inc. from exploring for gas off the coast of Cape Breton until public hearings were held into the matter. The spate of onshore drilling also worries environmental groups such as Prince Edward Island’s Earth Action, which has launched a campaign to ban petroleum exploration. For now, however, there’s more giddy hope than fear. “I’ve spent my life watching other places strike it rich,” says Duncan Maclnnis, 49, a petroleum geologist from Arisaig, N.S., working on Meteor Creek’s PE.I. well. “It would be nice to see it happen here.” CO