08 April 2009

That’s great but…

There are plenty of pockets of oil offshore Newfoundland that have “significant discovery” status that aren’t commercially viable finds.

Expect StatoilHydro’s announcement that it has found hydrocarbons in a well on the Flemish Pass to be super hyped to all get out.  Some people will be over the moon just like they were hysterical in the early 1980s over Hibernia and Hebron.

This find is in at least 1100 metres of water.

Statoil Hydro will apparently apply to the offshore regulatory board to have this well declared a significant discovery

Before anyone gets excited, here’s the official definition of that term:
"a discovery indicated by the first well on a geological feature that demonstrates by flow testing the existence of hydrocarbons in that feature and, having regard to geological and engineering factors, suggests the existence of an accumulation of hydrocarbons that has potential for sustained production."
Look at that word “potential”.  Notice as well that nowhere in there does the word phrase “commercially viable” appear.

News of a find offshore is great but….

And it’s the stuff after the but we need to think about.  More information down the road and we can make a better judgment if this actually means anything more than the fact they’ve found oil.

Strong update: For those who missed it, local oil industry expert Rob Strong did a great interview on the StatoilHydro announcement with Radio Noon.  If they post an audio file, we'll link it.

Rob is well known in the local industry having been in it from the beginning. He did a great job of balancing the excitement that comes with a find of any type offshore with the wisdom borne from experience that there is still a long way to go before anywone starts uncorking the champagne.

Rob talked about the deep water and the challenges that come from drilling that far out in that much water.  Technology has come a long way but there are plenty of issues to be addressed in trying to bring oil into production that far out and down, even allowing for it to be large enough a find to be commercially viable.

Of course, too, we all have to recall that area is outside the current 200 mile exclusive economic zone.  No one has resolved yet what, if any, implications arise for anything that far out to sea from the provisions of the United Nations Convention on the Law of the Sea (UNCLOS).

That's the thing:  StatoilHydro's announcement is great.