The Scotian shelf: an atlas of human activities

Oil and Gas Industry

Introduction: Oil and Gas Activities in the Offshore

Petroleum Reserves

The Scotian Basin in Nova Scotia’s offshore is known to possess significant deposits of petroleum. The Sable Subbasin, centred on Sable Island, appears to be particularly rich in natural gas with local reserves potentially exceeding 18 trillion cubic feet (Tcf) and about 1 billion barrels (BB) of oil and gas liquids (Canadian Gas Potential Committee 2001). These reserves have received considerable attention from the petroleum industry, in part because of their location in shallow water and proximity to significant energy markets in the northeastern United States. Many hundreds of millions of dollars have been spent on exploration in the offshore and several billion dollars have been spent on production (Nova Scotia Department of Energy 2004).

There are similar estimates for hydrocarbon reserves in other geologically related basins in Nova Scotia’s offshore, but they remain virtually unexplored. These include the deep water Scotian Slope (Kidston et al. 2002), the Laurentian Subbasin (MacLean and Wade 1992), and the Shelburne Subbasin (Georges Bank) (Hardie et al. 1986). Together, the combined volumes for the entire Scotian Basin are thought to be similar to those found in other Canadian frontier basins such as the Beaufort-MacKenzie Basin and the Labrador Shelf (Kidston et al. 2002).

Exploration History

The petroleum industry has been exploring for petroleum on the Scotian Shelf for nearly half a century. In 1959 Mobil Oil Canada was issued the first offshore exploration permit covering the Sable Island area. This led to the drilling of the first exploration well on Sable Island in 1967 which encountered a number of oil and gas “shows” (observations of oil and gas). This was followed two years later by the first discovery of significant quantities of natural gas on the Scotian Shelf by Shell Canada just south of Sable Island. Between 1972 and 1979, a number of significant hydrocarbon discoveries were made in the Sable Subbasin. The Cohasset-Panuke Project (COPAN) was the first offshore energy project on the Scotian Shelf. Its oilfields came into production in 1992. The larger Sable Offshore Energy Project (SOEP) began production seven years later and continues to produce oil and gas today (Nova Scotia Department of Energy 2004).

Management

Jurisdiction over offshore resources was a matter of debate between Canada and Nova Scotia during the first two decades of exploration on the Scotian Shelf (La Forest et al. 2001). Early exploration rights were issued by the federal Department of Indian Affairs and Northern Development. In 1966, the federal Department of Energy, Mines and Resources assumed administrative authority.

Initial exploration rights were issued in large blocks that covered most of the Scotian Shelf (see e.g., Figure 2). Actual exploration activity (e.g. seismic surveys and drilling) occurred only in small portions of each block. As more geological data was collected and knowledge increased it became possible to identify areas where significant petroleum reserves were more likely to be found. Exploration activities began to focus on specific areas. This resulted in smaller land parcels being nominated and awarded. By 1982 exploration had become focussed around Sable Island and along the shelf break and slope (Figure 3).

During the 1980s, the Government of Canada agreed to manage offshore resources jointly with Nova Scotia and Newfoundland and Labrador in the areas adjacent to those provinces. Consequently, the federal government signed accords with Nova Scotia (1986) and Newfoundland and Labrador (1988) that led to the establishment of joint federal-provincial management boards for offshore petroleum. These became the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB) and the Canada-Newfoundland Offshore Petroleum Board (C-NOPB), which became the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) on May 1, 2005.

In accordance with common legislation passed at both the federal and provincial levels, the boards are responsible for managing virtually all aspects of the offshore petroleum exploration and development process. This process is fairly complex and involves a number of distinct steps, which are explained in more detail on the following pages. There are environmental review processes at various stages, from land nomination to development plan submission.

Many aspects of the petroleum exploration and development process are shown in this section of the atlas. Some of the information used in the maps was generated by industry and provided through the offshore boards; however, some industry data is proprietary and cannot be shown in this atlas. As well, changes in the regulatory structure for the offshore over past decades have resulted in discontinuity in data records. For that reason, the maps in this section should not be considered a complete record of all activity that has occurred or is occurring in the offshore. Nonetheless, these maps offer a general illustration of major trends and patterns in ocean use related to offshore petroleum activities.

Canadian Gas Potential Committee. 2001. Natural Gas Potential in Canada - 2001. Canadian Gas Potential Committee.

COGLA (Canada Oil and Gas Lands Administration). 1982. Offshore Oil and Gas Lands, January 1, 1982.

Hardie, D., F.R. Engelhardt, R.H. Bailey, C. Briscoe and A.C. Murray. 1986. Petroleum Exploration on the Canadian Georges Bank - A discussion paper on environmental implications. Canada Oil and Gas Lands Administration, Energy Mines and Resources Canada.

Kidston, A.G., D.E. Brown, B. Altheim, and B. Smith. 2002. Hydrocarbon Potential of the Deep-Water Scotian Shelf. Canada-Nova Scotia Offshore Petroleum Board. (7 April 2005).

La Forest, L., L. Legault, and J. Crawford. 2001. Arbitration Between Newfoundland and Labrador and Nova Scotia Concerning Portions of the Limits of Their Offshore Areas: Award of the Tribunal in the First Phase. (15 December 2004).

MacLean, B.C and J.A. Wade. 1992. Petroleum geology of the continental margin south of the islands of St. Pierre and Miquelon, offshore eastern Canada. Bulletin of Canadian Petroleum Geology, 40: 222-253.

Mills, H. 1971. Eastern Canada’s Offshore Resources and Boundaries: study in political geography. Journal of Canadian Studies 6: 36-50.

Nova Scotia Department of Energy. 2004. Oil and Gas Offshore. (15 December 2004).

Management Areas and Exploration Licenses in 2005

The Canada-Nova Scotia Offshore Petroleum Board manages petroleum exploration and development in most areas of offshore Nova Scotia. The north side of the Bay of Fundy and parts of the southern Gulf of St. Lawrence are outside the Canada-Nova Scotia Accord area and fall under federal jurisdiction. Accord-defined “Inland Water” regions such as St. Georges Bay and Minas Basin are under the exclusive jurisdiction of the province of Nova Scotia. The Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) manages part of the Laurentian Subbasin.

Certain areas of the Nova Scotia offshore are temporarily closed to petroleum exploration. One of these areas is Georges Bank, where a moratorium has existed since 1988 and remains in effect to December 31, 2012. Exploration was also suspended until recently in the Laurentian Subbasin, southeast of Cape Breton, because of a decades-long boundary dispute between Newfoundland and Nova Scotia. This dispute was finally settled by tribunal in 2002 and the C-NLOPB has since issued eight licenses in its portion of the basin. As of early 2005, the CNSOPB had nearly completed the conversion of the original exploratory permits issued under the former federal regime to new exploration licences that it will issue to the interest holders.

Exploration licenses (ELs) grant the holder the right to explore for petroleum and obtain a production license on lands designated in the license, subject to conditions defined by relevant legislation. ELs are awarded through a competitive bidding process. The process begins with a Call for Nominations, under which oil and gas companies nominate offshore lands that they would like to see offered in a Call for Bids. Following a review of the nominations by the board, a Call for Bids for ELs may be issued. Companies bid on lands they wish to explore and successful bidders are issued an EL that gives them specific exploration rights over a defined period of time - usually about five years. An EL may be renewed if a well is drilled before the license expires.

At present there are 33 active ELs in the area under CNSOPB jurisdiction. With the exception of the western Cape Breton parcel and two parcels in Sydney Bight, most CNSOPB ELs are situated on the outer offshore banks and along the shelf break and slope.

Recent Trends in Exploration Licenses

Interest in exploring and developing Nova Scotia’s offshore area grew rapidly in the late 1990s, as natural gas pricing was deregulated in North America, production technologies advanced and geological knowledge improved, particularly as related to deep water deposits. In 1998, the number of new exploration licenses (ELs) jumped to five from only one the previous year, indicating the beginning of a new wave of exploration. Most of the new exploration was focused on the deep water Scotian Slope. This pulse of exploration was initially quite successful, and consequently the number of new ELs climbed to six in 1999, eight in 2001, and nine - the annual record to date - in 2002.

After 2002, interest in the Scotian Shelf and Slope waned as a number of exploratory wells failed to discover significant hydrocarbon accumulations, and estimates of reserves at several fields currently in production were reduced. Only two new ELs were issued for the Nova Scotia offshore area in 2003 and none in 2004, while a number of existing licenses were allowed to expire. Interest nevertheless remains high in the relatively unexplored Laurentian Subbasin between Nova Scotia and Newfoundland, and the successful Abenaki reef trend (a geological feature west of Sable Island). Eight new ELs were issued in the Newfoundland and Labrador portion of the Laurentian Subbasin last year to replace previous federal exploration permits

Commercial Seismic Surveying on the Scotian Shelf (1999-2003)

Seismic surveying is a technique used to predict the location of petroleum resources. Marine surveys make use of airgun arrays that direct energy pulses into the seabed. The sound waves reflect and refract differently depending on the underlying geological structure. By recording and analyzing the sound waves that return to the surface, scientists can determine geological characteristics and predict whether oil and gas deposits are likely to be present. Seismic surveys are also used to define bathymetry and identify potential geological hazards.

Until recently, marine seismic programs captured a two-dimensional cross section of the substrate along each survey line. New technology emerged in the mid-1990s that allowed scientists to create more accurate three-dimensional images of sub-surface structures. Three-D seismic involves a denser sailing pattern and a greater number of hydrophone streamers (for more detail on seismic technology, see Davis et al. 1998).

Once an exploration license has been issued, the holder usually begins exploration by conducting a 2-D seismic survey. If the results of the survey suggest that petroleum deposits are likely to be present, smaller areas with the most potential are evaluated using 3-D seismic surveys. The survey results are ultimately used to locate and plan exploration drilling programs, targeting the structures or features with the highest potential for oil or natural gas. As seismic coverage increases and geological knowledge of the shelf improves, it becomes possible to focus seismic acquisition on areas where undiscovered hydrocarbons are most likely to be present.

Information on seismic programs for the entire CNSOPB management area is shown here, including programs that overlapped with other management areas. However, only programs that had digital data available were included. Each shaded cell (10 kilometres x 10 kilometres) on the map shows 2-D seismic acquisition effort as the sum of estimated trackline kilometres shot in that cell between 1999 and 2003. The 3-D programs are shown as shaded lines on top of the coloured cells. The map shows only the seismic programs that were conducted by industry and not those conducted by government or other researchers. The majority of the outer Scotian Shelf was surveyed during the 1999-2003 period. The survey pattern generally reflects the location of exploration licenses on the shelf.

Davis, R.A., D.H. Thomson, and C.I. Malme. 1998. Environmental Assessment of Seismic Exploration on the Scotian Shelf. LGL Limited Environmental Research Associates. Prepared for Mobil Oil Canada Properties Ltd., Shell Canada Ltd. and Imperial Oil Ltd. for Submission to the Canada-Nova Scotia Offshore Petroleum Board. (14 December 2004).

Exploratory Wells and Significant Discoveries

Exploratory wells are used to confirm the existence of hydrocarbons and to determine the types and volumes present. Before drilling, companies use the results of seismic surveys to determine which areas have the best prospects. The wells are drilled using mobile platforms. Depending on water depth, these may sit directly on the ocean bottom (jack-up rigs), or float above it (semi-submersibles and drill ships). The wells can be drilled to over 6000 metres in depth to evaluate and test potential hydrocarbon reservoirs, including the size of the reserve, its flow rate and potential production rates. Data from the well is also used to evaluate and estimate the hydrocarbon potential for similar prospects in the basin and for the basin as a whole.

Over one hundred exploratory wells have been drilled on the Scotian Shelf, the majority on the eastern shelf with a particular concentration around Sable Island. Although most wells have been drilled on the shelf’s relatively shallow banks, some have been drilled in much deeper water - up to 2085 metres - along the Scotian Slope. If an exploratory well leads to a significant discovery of oil or gas, the proponent may apply for a significant discovery license (SDL). The SDL applies to the specific area where the discovery has been made and allows the holder to maintain the rights granted by an exploration license until they are ready to start production. The license holder may make an application for a commercial discovery declaration when an area appears to have enough petroleum reserves for commercial production.

Petroleum Development and Production

If an oil or gas field is found to possess commercially viable reserves, a production license may be issued that allows the extraction of petroleum for sale. To date, production has ccurred from two projects on the Scotian Shelf: the Cohasset-Panuke Project (COPAN) and the Sable Offshore Energy Project (SOEP). COPAN, which began production in 1992, consisted of 11 production wells on two fields just west of Sable Island. By 1999, when the project was completed, 44.5 million barrels of light crude oil had been extracted (Jacques Whitford 2004).

The larger SOEP began production in late 1999, initially drawing gas and gas-liquids from three fields: Thebaud, Venture, and North Triumph. Two additional fields, Alma and South Venture, have since come into production. A sixth field, Glenelg, was considered for production, but plans to develop this field have been suspended. The hub for the project at Thebaud connects processing platforms at the active fields to a submarine pipeline. The pipeline runs to an onshore gas plant in Goldboro, Guysborough County. According to activity reports from the Canada-Nova Scotia Offshore Petroleum Board, SOEP produced a daily average of approximately 11.86 million cubic metres of natural gas in 2004 (CNSOPB 2005).

PanCanadian (now EnCana) unveiled plans in 2001 for a production project at its Deep Panuke gas discovery, beneath the older COPAN oil field. The company later announced that it was putting the project on hold due to economic concerns. EnCana is still considering proceeding with the project on a more limited scale.

CNSOPB. 2005. Weekly Operations Report: Sable Gas Project Production Status (February 10, 2005). Canada-Nova Scotia Offshore Petroleum Board. (March 3, 2005).

Jacques Whitford. 2004. CEAA Screening Environmental Assessment for Cohasset-Panuke Phase II Decommissioning. Prepared for EnCana Corporation.