First, the good news.
Canada’s Calgary-based Husky Energy Inc. and its Norwegian partner Statoil ASA announced a major oil discovery in offshore Newfoundland and Labrador Flemish Pass Basin.
The find of light oil last month at the Bay du Nord prospect contains an estimated 400 million barrels.
Husky Energy Inc. announced in a 26 September press release, “Husky with its partner Statoil recently conducted a successful exploration program in the Flemish Pass Basin, located approximately 500 kilometers northeast of St. John's, Newfoundland and Labrador. The Company holds a 35 percent working interest in three discoveries, which are located in close proximity to each other in about 1,100 meters of water. Highlights include: The discovery of light oil in August, 2013 at Bay du Nord, located approximately 20 kilometers south of the previously announced Mizzen discovery. Best estimate contingent resources are estimated by Husky at 400 million barrels (on a 100 percent working interest basis) as of September 23, 2013. Additional prospective resources have been identified which require further delineation.”
Statoil, 67 percent-owned by the Norwegian government, is the operator of Bay du Nord, Mizzen and Harpoon with a 65 percent stake, while Husky Energy Inc. has 35 percent. Statoil Head of Exploration Tim Dodson said, “There are other parts of the structure which are regarded as prospective and not included in the volumes we quoted. And there are other prospects over and beyond that in the license.”
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All this is good news for the U.S., which is the largest importer of Canadian crude. According to the U.S. Energy Administration, Canada is the leading source of United States crude oil imports, which average 9.033 million barrels per day, with Canada sending 2.666 mbpd southwards to the U.S.
“Canada is one of the world's five largest energy producers and is the principal source of U.S. energy imports. … Just as the United States depends on Canada for much of its energy needs, so is Canada profoundly dependent on the United States as an export market.”
The EIA continues, “Canada is the world's sixth-largest oil producer, and virtually all of its crude oil exports are directed to U.S. refineries” In 1988 Canada and the United States signed a free trade agreement that was supposed to ensure Canada would never prevent the U.S. from having first access to its huge oil reserves and bilateral trade, which is now worth more $750 billion annually.
The vast bulk of Canadian oil ends up refined into gasoline to power America’s 250 million cars, one quarter of the world’s fleet of roughly one billion, 25 percent of the world’s total, an extraordinary figure, considering that the U.S. has less than 5 percent of the world’s population.
According to Dodson, there’s a “distinct possibility” that the three Flemish Pass discoveries will be developed together with earlier offshore strikes Harpoon and Mizzen, located within 20 kilometers of Bay du Nord, With the oil lying under 1,100 meters of water, subsea extraction will require “some kind of floating installation.”
Eye of the needle?
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Statoil, which plans more seismic studies and exploration in the Flemish Pass Basin in the next few years, is dependent on the acquisition of rigs. Bay du Nord will probably require a further two wells and Dobson added, “Rig availability is an issue, this is not a particularly active area,” he said. “We need to have the right kind of rigs to drill in this kind of environment.” Statoil Canada Exploration vice-president Geir Richardsen commented, “It’s the biggest discovery ever done outside of Norway for us as an operator and that is a significant step.”
Statoil Canada Exploration vice-president Geir Richardsen said, “It’s the biggest discovery ever done outside of Norway for us as an operator and that is a significant step. Just a few wells have been drilled and it’s a huge area. We don’t know what the rest contains.”
American motorists await his answer.
By. John C.K Daly of Oilprice.com