Costs push back Chevron exploration plans off Newfoundland

Chevron Canada is pushing back plans for deep-sea exploratory drilling off Newfoundland's east coast,the first major effect of the global financial crisis on the province's oil industry.

Chevron had been planning to work on an exploratory well, the company's second, in the Orphan Basin, a stretch of the Grand Banks that has not yet led to a commercial find.

Mark MacLeod, regional manager for Chevron, told CBC News on Tuesday that the costs of the remote work are proving to be too rich for the company for now.

"We've decided to defer the drilling of this second well in order to give us a bit more time to better understand the risk and the cost of this well," MacLeod said in an interview.

"Our cost estimates for the well were coming in much higher than anticipated, so we're going to take a bit more time to evaluate our options and come up with the best place to drill that well."

Another factor has been the difficulty in finding a rig capable of drilling not just in deep water, but in the harsh climate of the North Atlantic.

MacLeod said Chevron remains "fully committed" to its exploration work in the Orphan Basin.

"It's a very high potential basin, but it's also very high risk and high cost," said MacLeod, who would not disclose what costs the company is tackling.

The Orphan Basin is north of the Jeanne d'Arc Basin, the site of the three fields Hibernia, Terra Nova and White Rose now in production.

Chevron is a key player in the development of the fourth project, Hebron, which was announced last summer. Although ExxonMobil is Hebron's manager, MacLeod said the deferral of exploration work is not connected to Hebron.

"We see no linkage between the two," MacLeod said.