The progress of the Hibernia project and speculation surrounding a potential discovery on the Province's West coast served to galvanize interest in exploration and future oil development. Two land sales – one onshore and one offshore – drew an unprecedented response from the industry resulting in over $115 million in committed exploration expenditures. With the majority of Hibernia infrastructure in place, preparations have begun in earnest for the development of Terra Nova, the second largest discovery in Newfoundland's offshore area.

The Projects

Terra Nova

The Terra Nova consortium, led by Petro-Canada, announced that it will submit a Development Plan Application (DPA) to the Canada-Newfoundland Offshore Petroleum Board for the Terra Nova oil field. It is expected that the DPA will be submitted this year assuming that fiscal terms and benefits are finalized with the federal and provincial governments. Petro-Canada and its partners have selected three alliance groups to work with the consortium to prepare designs for the production system for Terra Nova. The winning design will be selected early in 1997. With this work well underway, the consortium believes that, with approval of the DPA by 1997, oil production is attainable by the turn of the century, as much as two years ahead of the original schedule.

The $6 billion (total) project will operate for 15 to 20 years and require a workforce of approximately 450 during peak periods. With Hibernia and Terra Nova operating at full capacity, production from Newfoundland's Grand Banks could account for approximately 20 percent of Canada's light crude oil production.

Whiterose

Husky Oil recently announced plans to develop the Whiterose oil field in the Grand Banks region. Husky plans to drill up to four delineation wells starting in 1997 at a cost of $25 million per well. The drilling program will, among other things, give the Company data to determine the exact size of the field which is currently pegged at about 250 million barrels. If all goes according to plan, Whiterose oil could be flowing by 2004 with 400-500 people employed during peak operations.

Hibernia

Workers at the Bull Arm construction site completed the ice wall of Hibernia's Gravity Base Structure and for the first time stood on top of the massive platform in 1995. This achievement came at the end of what was a record setting year for the project. Provincial employment averaged 5,450, a new high, and total project spending peaked at $1.4 billion. With the construction phase of the project nearing completion, the Hibernia consortium began to focus on the production phase. $736 million in drilling and production phase contracts have been awarded with over half of the total expected to accrue to Newfoundland firms and employees.

Hibernia Transshipment

Mobil Oil Canada and Chevron Canada Resources are evaluating an option to build their own transshipment facility for Hibernia crude in Newfoundland rather than construct a third oil tanker. The facility, when built, is designed to off-load shuttle tankers, store crude oil, and reload smaller tankers for transport to market. If built in the Province, the facility would give rise to 1,000 construction jobs. During operations, 30 people are expected to be employed on a full-time, year-round basis.

Exploration Expenditures

Set to Soar Exploration activity on the Province's West coast rose significantly in 1995. Expenditures reached $21 million, the highest level ever recorded in the region. Newfoundland Hunt Oil Company concluded drilling operations on its onshore well on the Port au Port Peninsula in March and spudded a second onshore-to-offshore well in the area later in the year. Speculation surrounding a potential discovery on the first well led to several seismic programs in the region and the Province's largest onshore land offering to date. Twenty-eight land parcels sold for a combined work commitment of $21 million, a new record. The largest bids were received by the Hunt Oil-PanCanadian partnership and Mobil Oil Canada Properties for parcels located near their initial drilling program on the Port au Port Peninsula.

Offshore Land Sale Announced

Oil companies have turned their attention once again to the Grand Banks region. In response to this renewed interest, the Canada-Newfoundland Offshore Petroleum Board announced another land sale consisting of eight offshore parcels; four in the Grand Banks region and four off of the Province's West coast. The Call for Bids will close September 30, 1996 and, like the onshore land sale, is the Province's largest area offering to date. The last offshore land sale in the Grand Banks region closed September 1995 and resulted in Amoco Canada's record setting bid of $90 million for an offshore licence adjacent to the Terra Nova field. Amoco has stated that it will drill a well on the land parcel in 1997.

Outlook

The outlook for the oil and gas industry in 1996 is very positive. Exploration expenditures are expected to increase for the fourth consecutive year. Exploration in the western region will include seismic work and drilling activity on one offshore well and one onshore-to-offshore well at a combined cost of $32 million. The provision of supplies, transportation and accommodations for the drilling programs will have a positive impact on the local economy. Moreover, record setting land sales on the East and West coasts provide for significant upside potential for exploration. Work on Hibernia's Gravity Base Structure and the topsides will conclude in November with mating expected to begin in March 1997. Employment on the project is expected to average 3,000 or more, with expenditures of $870 million. Pre-engineering on the Terra Nova project is ongoing, thus allowing the consortium to proceed as quickly as possible once the Development Plan Application is approved.