In addition to the global demand for deep water drilling rigs, the geology of the area is posing problems for seismic interpretation.
Seismic surveys are used to map what lies beneath the ocean floor. Waves of compressed air are shot toward the seabed, and the signal reflected back creates an image of rocks and pools of oil and gas that are found kilometres below the ocean floor.The Conoco land parcels are in water as much as 2,200 metres deep but only as shallow as 1100 metres. That puts them on par with the Orphan Basin and large portions of the Gulf of Mexico where the Jack 2 field was recently discovered. Even if commercial quantities of oil and gas are confirmed, the water depth involved would pose a challenge for current technology to exploit profitably.
In the case of the Laurentian surveys, the pulse bounced back multiple times and the images were unclear. What might have taken 10 months to evaluate took 18 months to clean up the images.
"The Laurentian Basin is an absolute frontier basin. There are no wells in the deepwater portion of that basin," said Hogg. "We are in our infancy in understanding the basin."
Those practical challenges are one of the most potent arguments against any facile approach to land management such as fallow field that would demand development within as little as five or 10 years by a company or face expropriation. When it was originally discovered, Hebron was considered commercially non-viable since its heavy oil (circa API 21) and fractured structures posed significant problems for then-extant engineering and oil extraction ability. Only changes on the technical side coupled with changes in world oil demand made the project commercially viable some 20 years after it was discovered.
A Conoco spokesman also told the Telegram that
the company will continue to work with the province as it develops the royalty regime.Premier Danny Williams told the Financial Post in an interview on Friday that the provincial government is working on a new oil and gas royalty regime. Key components of both will be a so-called "equity" position for the provincial government through its Hydro corporation.
"That being said, it is important to us to have the royalty (regime) before we drill the well."
Mr. Williams said the energy policy will require provincial equity stakes in both future oil and gas projects, but wouldn't reveal how much, other than it will be higher than the 4.9% negotiated for Hebron.Unconfirmed reports put the equity demand at 10%. That could mean little to Husky, which is seeking to develop gas prospects on its White Rose project and which would be grandfathered through the equity provisions of the regime.
It will also include a natural gas royalty regime, which has also been expected for years, and cover environmental requirements and the electricity industry.
The gas regime has been completed and has been shared for feedback with Husky and ConocoPhillips Co., Mr. Williams said.
For companies like Conoco, however, such a demand, especially when the financial implications are still far from clear, could further delay exploration. Both Williams and his close associates have stated that the provincial government would pay for an equity position. They have yet to explain how the provincial government, supposedly labouring under an enormous debt burden, would find the hundreds of millions of dollars such a stake could cost. Nor have they stated how an equity position would provide any financial or other benefits to the province beyond the huge returns already received. Williams has consistently denigrated existing royalty regimes despite their delivering over 25% of the provincial government's own-source revenue.
if the province's royalty regime raises the cost of exploration and development beyond the company's profitability on a frontier field, Conoco's drilling program - now forecast for 2009 at the earliest - may well be pushed back further into the future.
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