As BP abandons highly touted offshore oil prospect, ExxonMobil prepares to drill

Those hoping for a major new discovery by BP Canada in Newfoundland and Labrador's offshore are trying to make sense of the company's decision to abandon its Ephesus prospect in the Orphan Basin following what appears to be an abbreviated drilling campaign.

At the same time, industry boosters are holding out hope that another exploration well one being financed largely by cash from the province's offshore exploration initiative planned for this summer by ExxonMobil Canada and its partner, Qatar Energy,will have better results.

Signs indicate that BP's probe, using the drill ship Stena IceMax, was unsuccessful. But the companyis saying very littlesince it has the right to keep drilling results secret for up to two years.

"Currently we are in the process of plugging and abandoning the well as per plan," a BP official wrote in a statement last week to CBC News.

So was the well a duster? It'san industry term used to describe a scenario in which no hydrocarbons were discovered.

BP won't say, but those who follow the industry say it's the most logical assumption.

"They've announced that they're abandoning the well. So that to me indicates that they're not coming back," said Rob Strong, a veteran energy consultant based in St. John's who's been linked to the offshore oil industry since the late 1970s.

The Ephesus F-94 exploration well in licence No. 1168 targeted what was being described as a multibillion-barrel structure in the West Orphan Basin, located more than 300 kilometres northeast of St. John'sin water depths of 1,300 metres.

The activity has drawn fire from environmental groups because the well is located in a marine refuge, and critics say exploration for new discoveries should end because of the effects that the burning of fossil fuels has on the climate.

Ephesus is part of a larger exploration drilling campaign proposed by BP in the Orphan Basin, involving multiple wells between 2023 and 2026.

Hopes in the local supply and service sector were high that success at Ephesus would position the Orphan Basin as the next major frontier in the offshore. If so, it wouldjointhe already mature Jeanne d'Arc Basin, which is home to four legacy oil fields, and the Flemish Pass, where Equinorhas made major discoveries and continues to evaluate the viability of the massive Bay du Nord project.

"Some suggestedthe [Ephesus]reservoir size could be as big as the whole Jeanne d'Arc Basin. What happened? I don't know," said Strong.

BP is not saying whether it will continue its search for hydrocarbons in the Orphan Basin, but Strong said these are complicated times for the oil sector and wonders if the company simply lost interest.

"We know the government of Canada is not keen on future developments. Maybe they've decided what's the sense in finding something if we can't produce? I just don't know. I wish BP would be more open with us all," said Strong.

"It makes you think twice as to what the long-term future is."

BP's decision to abandon the Ephesus well is the latest setback forthe province's oil and gas industry. Last month, Equinor shocked delegates at the annual energy conference in St. John's by announcing it was delaying a decision on whetherto develop the Bay du Nord project for up to three years.

But as questions over the future of the offshore oil and gas industry mount, ExxonMobil Canada, the lead partner in the Hibernia and Hebron oil fields,is pressing ahead with an exploration well of its own.

The semi-submersible drill rig Hercules arrived in the waters off Bay Bulls over the Canada Day weekend following a transatlantic voyage from Norway. It is undergoing inspections by Canadian authorities and receiving supplies before heading offshore.

ExxonMobil has contracted the rig for 135 days, with an extension option for up to 60 days, according to industry reports.

The Hercules will drill a prospect called Gale N-66, located in the Jeanne d'Arc Basin, in an area known as the Central Ridge,about 365 kilometres east of St. John's.

The value of the Hercules contract is not known, but $50 million of the cost will becovered by a provincial government program aimed at growing the offshore oil and gas industry.

Companies that bid on exploration rights in the offshore are required to make a deposit of 25 per cent of their exploration commitments, which in some cases can reachinto the hundreds of millions of dollars. Some or all of these depositscan be forfeited if the bidder does not meet its work commitment.

The province uses the forfeitures to cover a percentage of the second and third exploration wells of a drilling campaign.

The Gale well is the third in ExxonMobil'sCentral Ridge drilling campaign. The second well, called Hampden, received a reimbursement of up to $30 million.

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