The Honourable Andrew Parsons, Minister of Industry, Energy and Technology, today, announced an amendment to the eligibility criteria under the Offshore Exploration Initiative allowing qualified operators an additional year to drill.
The deadline for spudding a well under Exploration Licenses issued in and prior to 2019, has been extended from December 31, 2022 to December 31, 2023.
In September 2020, the Provincial Government announced the establishment of a new Offshore Exploration Initiative to provide companies with an incentive to drill more wells on the best prospects in the province’s offshore. The Initiative was intended as an incentive for oil and gas companies to drill exploration wells offshore Newfoundland and Labrador and is funded by forfeitures of security deposits toward work expenditure bids posted by successful bidders in offshore land sales.
To date, Government has approved an application under the Offshore Exploration Initiative from ExxonMobil Canada Limited to support the drilling of an exploration well in offshore Eastern Newfoundland.
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, a portion or all of the security deposit is forfeit. The policy measure allows forfeited security deposits to be reinvested into offshore exploration projects.
The offshore exploration initiative is designed to fund a percentage of well costs beyond the first well drilled on a license. The new deadline for spudding and completing a well under the Offshore Exploration Initiative is intended to help companies who hold Exploration Licences in the province’s offshore compete internally for limited exploration capital to drill on those prospects in the province’s offshore jurisdiction.
The extended deadline will provide companies who may be considering an exploration drilling program offshore Newfoundland and Labrador additional time to complete the necessary planning as well as get all necessary approvals and contractual arrangements associated with a drilling program in place.
Investment in Newfoundland and Labrador’s offshore oil and gas sector represents investment in a region that is committed to net zero by 2050, has a stringent regulatory regime in place and is committed to working with operators as they look to reduce emissions.
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“This creative solution helps to ensure exploration dollars committed by private industry in Newfoundland and Labrador’s offshore will be used for further exploration in our province – which in the near term protects and creates jobs and in the long-term helps us to find our next commercial discoveries which lead to significant economic benefit through taxes, royalties, dividends and industrial benefits.”
Honourable Andrew Parsons
Minister of Industry, Energy and Technology
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Offshore Exploration Initiative
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