January 20, 2012 / 6:38 PM / 6 years ago

Shell wins $970 million Nova Scotia acreage bid

4 Min Read

CALGARY, Alberta (Reuters) - Royal Dutch Shell (RDSa.L) has won bids for four parcels of acreage off Nova Scotia by offering to spend C$970 million ($961 million) on exploration, in the first major show of industry interest in the Eastern Canadian province in several years, regulators said on Friday.

Shell's winning bids are the richest-ever for oil and gas acreage on the country's East Coast, the Canada-Nova Scotia Offshore Petroleum Board said.

The oil major said it plans to conduct 3-D seismic tests next year and start drilling the following year, assuming it can get crews and rigs.

"Shell views this as an important entry into an attractive new, deepwater basin offshore Nova Scotia," it said in a statement.

Unlike the last Nova Scotia exploration boom a decade ago, when companies sank hundreds of millions of dollars in an ultimately fruitless search for major natural gas reserves, Shell's parcels have oil potential.

Peter MacKay, Canada's Minister of Defence and the regional minister for Nova Scotia, said the province's offshore reserves could hold as many as 8 billion barrels.

That potential, in waters 200 km (124 miles) off Nova Scotia's southwest coast, has been shown through recent studies by a provincial offshore energy technical agency and Shell's own analysis, Stuart Pinks, the board's chief executive, told Reuters.

Industry buzz appears to be building again as the province ramps up marketing efforts to the oil industry, Pinks said. The last grants of acreage were in 2009 following bids totaling just C$12.6 million.

"Certainly we have, and the Department of Energy has, noticed an increased interest and a number of companies saying they want to take another look at offshore Nova Scotia," Pinks said.

The board plans to hold its next call for bids in May.

Shell's newly acquired parcels were offered to companies with experience in drilling deeper than 800 meters (2,625 feet). The bids represent the amount of money it intends to spend on exploration in the first six years of a nine-year license.

Currently, Nova Scotia's only producing project is the Exxon Mobil Corp-operated (XOM.N) Sable natural gas venture, in which Shell is a partner. It started up in 1999 and pumps about 300 million cubic feet a day.

Encana Corp's (ECA.TO) Deep Panuke project, another gas development, is scheduled to start producing this year.

Energy companies have explored off the Nova Scotia coast since 1959 and the latest boom was in the early part of the last decade, when companies such as Marathon Oil Corp (MRO.N), Chevron Corp (CVX.N) and Imperial Oil Ltd (IMO.TO) drilled pricey exploration wells.

The industry drilled six of them between 2002 and 2004, but halted the activity when none unlocked large commercial reserves, according to the CNSOPB.

However, the size of Shell's bids "gives everybody cause for optimism," Pinks said.

($1=$1.01 Canadian)

Editing by Rob Wilson

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