Oil & Gas Update: Shell Canada Ltd. Becomes Joint Venture Partners with ConocoPhillips and Suncor Energy

October 8, 2014

In June of this year, Shell Canada Ltd. (“Shell”) announced that it had entered into an agreement with ConocoPhillips and Suncor Energy to become joint venture partners with respect to the exploration and development of Shell’s $1 billion offshore exploration project in the Shelburne Basin. Shell maintains a 50% interest in six exploration licenses that cover a contiguous area of 19,845 km2 located roughly 300 km off the coast of Nova Scotia and Shell remains the operator of the project.

Shell has recently expanded the size of its drilling and operations team in Atlantic Canada and is looking to acquire additional office space in Halifax. Shell has contracted with Stena Drilling to drill exploratory wells off Nova Scotia and with drilling services provider Schlumberger to provide logistics services for the offshore exploration program. There are significant contracts yet to be awarded, which include finding offshore supply vessels to ferry cargo as well as helicopters to conduct crew changes and search and rescue. In addition, Shell will need to fill its needs in other areas such as material handling, inspection services, catering, warehousing and printing.

Shell’s announcement of the joint venture also disclosed that it anticipated drilling two wells in the second half of 2015 (subject to regulatory approval). Although Shell had planned to complete a 3D Wide Azimuth Seismic Survey over the course of a two-year period, the survey was completed ahead of schedule and successfully acquired data covering 10,850 km2 in a single season in 2013. Shell intends to conduct a seabed survey in 2014 of potential drilling sites to supplement the data gathered by the seismic survey. Shell may also drill a third exploratory well depending, among other things, on
the results from the first two wells.

During the week of September 8th, 2014, Shell hosted supplier engagement sessions at three locations in Nova Scotia. At the supplier engagement session in Dartmouth, Nova Scotia, Shell indicated that it is looking to replace existing deepwater heartlands as its existing heartlands around the globe mature and begin to decline in production. Shell’s Atlantic Canada venture manager, Christine Pagan, noted that the purpose of exploration programs, such as the one Shell is conducting in the Shelburne Basin, is to identify new heartlands.

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