West Mira loss a blow, but NOIA says future still bright for N.L. offshore

A decision by Seadrill to cancel its purchase of the West Mira semi-submersible is a blow to Newfoundland and Labrador's offshore oil industry, but the organization representing companies that supply the sector say the long-term future remains bright.

• Seadrill cancels order for West Mira drill rig at 11th hour

Statoil'spromising Day duNorddiscovery, for example, does not hinge on current oil prices, said BobCadigan, president and chief executive officerofNOIA, Newfoundland and Labrador'soil and gas industries association.

"A project of that size is built with a 20-yearlifespan, so the price of oil today isn't what matters," saidCadigan.

"It's what the price of oil is going to be over that 20-year period. So the loss of theMira,really, has no real impact on future development."

Cadiganadded that Husky Energy, the company WestMirawould have drilling for, will find another rig, and likely at a much lower price.

But he said the delay will hurt NOIA'smembercompanies that supply and service the offshore oil industry, and the hundreds of people hoping to fill jobs crewing and supporting the rig.

"We we've got a little perfect storm,"Cadigansaid.

Seadrill drops bombshell

Seadrill dropped a bombshell Tuesday when it announced the cancellation of its purchase of the West Mira, a half-billion-dollar ultra-deepwaterdrill rig under construction in South Korea.

Seadrill blamed the delay in completing the rig for its decision, but industry insiders say a prolonged slump in oil prices, and pressure on companies like Seadrill to lower lease rates, played a significant role in the decision.

The West Mirawas to become the centrepiece of a five-year contract between Seadrill and Husky for drilling operations in offshore Newfoundland, as well as offGreenland.

Its cancellation is the third is a string of job-losing jolts in the offshore oil industry.

Two iconic drill rigs, the Henry Goodrich and the GSF Grand Banks, have either left or are about the leave the offshore, taking hundreds of jobs with them.

Cadigansaid the industry is going through a cycle of lower prices, its sixth in the last 30 years, and oil is not expected to break theUS $60mark for at least another year.

But interest in the offshore remains high, buoyed largely by Statoil'simpressive discovery in the Flemish Pass Basin in 2013.

A land sale for oil exploration rights in the offshore is scheduled for November, and this follows a record-breaking year for bids in 2014, said Cadigan.

"The future is quite bright on the exploration side," he said. "Development will only occur once you explore and find."

There are currently three oil-producing fields in operation in the offshore, and a fourth,Hebron,is expected to come online in 2017.

Statoilhas suggested that its Bay du Nord find may begin oil production in the 2020-plus timeframe.