Today the Honourable Andrew Parsons, Minister of Industry, Energy and Technology, announced the details of the new Offshore Exploration Initiative to provide companies with the incentive to drill more wells in the best prospects off the coast of Newfoundland and Labrador.
Annually, the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) issues calls for bids for exploration licences in the province’s offshore. The sole criterion for selecting a winning bid is the total amount of money the bidder commits to spend on exploration of the parcel. The successful bidder is required to post a security deposit for 25 per cent of the work expenditure bid. If the bidder does not meet its work commitment, the security deposit is forfeit and the investment opportunity is lost.
The Offshore Exploration Initiative allows all future bid deposit forfeitures to be reinvested as received, resulting in a potential injection of hundreds of millions of dollars in support of growth in our offshore petroleum industry. By funding a percentage of well costs beyond the first well drilled on a license, the Government of Newfoundland and Labrador ensures that those funds are reinvested back into our offshore with maximum effect to yield those high impact discoveries that create our future projects.
Under the Offshore Exploration Initiative there will be no cost reimbursement for an eligible exploration license on the first well drilled. The second and third well will receive 30 and 50 per cent cost reimbursement respectively up to maximums of $30 and $50 million. This makes a third well more likely to occur and increases the chances of a discovery. It also allows licence owners to potentially test another structure within a given licence, further improving the odds of a discovery.
The fund will payout the year following the activity once expenses are submitted by the operator. If the eligible applications do not deplete the fund, remaining amounts are carried over to the following year. For any discoveries made through this fund, the well cost paid will be credited toward the province’s acquisition cost for its up to 10 per cent interest in the project.
Officials have been in contact with operators in our offshore to communicate the details of this program so they can consider this as they plan for future drilling campaigns. Upwards to 30 per cent of the province’s GDP, 13 per cent of labour compensation and 10 per cent of all employment is attributed to the oil and gas industry.
Additional details can be found on the Department of Industry, Energy and Technology’s website.
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“This exploration drilling incentive will provide near term drilling activity and employment, enhance global competitiveness at a critical time, and position the province to realize its significant resource potential.”
Honourable Andrew Parsons
Minister of Industry, Energy and Technology
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Learn More
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News Release: Provincial Government Announces New Offshore Exploration Initiative
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Media contact
Lisa Lawlor
Industry, Energy and Technology
709-729-5777, 631-8155
lisalawlor@gov.nl.ca