Chinese oil giant confirms 2021 well was a 'duster' — and it's leaving offshore N.L.

·3 min read
The Stena Forth drill ship, owned by U.K.-based Stena Drilling, drilled a single exploration well for CNOOC Petroleum North America in the Flemish Pass last year. CNOOC has confirmed that well was unsuccessful, and that the Chinese oil giant is leaving the Newfoundland and Labrador offshore industry. (Stena Drilling Ltd. - image credit)
The Stena Forth drill ship, owned by U.K.-based Stena Drilling, drilled a single exploration well for CNOOC Petroleum North America in the Flemish Pass last year. CNOOC has confirmed that well was unsuccessful, and that the Chinese oil giant is leaving the Newfoundland and Labrador offshore industry. (Stena Drilling Ltd. - image credit)

A Chinese oil giant has confirmed that a highly touted well drilled in the Flemish Pass in 2021 was unsuccessful and that the company is abandoning its efforts to become a producer in the Newfoundland and Labrador offshore oil industry.

The decision by the China National Offshore Oil Corporation follows earlier media reports, citing anonymous sources, that the company was preparing to sell its considerable assets in Canada, the United States and the United Kingdom because of concerns it may face future sanctions.

The company hired the Stena Forth drill ship to probe the deepwater Pelles well, 460 kilometres miles from St. John's, in licence area 1144, in the spring of 2020.

There were rumblings almost immediately that the well was a "duster" — oil industry slang term for a dry hole.

CNOOC is now confirming the well came up empty, and the company is leaving the province.

In a statement to CBC News, a spokesperson for CNOOC International wrote, "We made the difficult decision to relinquish our exploration licences in the Flemish Pass."

CNOOC is state-owned in a country controlled by the Chinese Communist Party, and became a player in the West after acquiring Canadian oil company Nexen in 2013 for $15 billion.

Sources have told the Reuters news service that CNOOC intends to exit Canada and other Western countries because of concerns its assets could be targeted for sanctions.

The assets include stakes in major fields in the North Sea, the Gulf of Mexico, and large Canadian oilsands projects.

Ties between China and the West have long been strained by trade and human rights issues, and the tension has grown following Russia's invasion of Ukraine, which China has refused to condemn.

'We do not comment on market rumours'

A spokesperson for CNOOC said, "We are aware of the media reports. We do not comment on market rumours."

CNOOC acquired the rights to exploration licence No. 1144 in offshore Newfoundland and Labrador in January 2016, with a commitment to spend up to $261 million in search of hydrocarbons, and bid some $40 million a year later to acquire licence No. 1150.

The company did not respond to questions about job losses, or whether it was forfeiting any security deposits to the offshore energy board for surrendering the licences.

"We appreciate the strong contribution made by all employees and contractors and we are proud of the work conducted in the area over the last six years," the CNOOC statement reads.

The board that regulates the offshore industry, the Canada-Newfoundland and Labrador Offshore Petroleum Board, confirmed in January that CNOOC has abandoned licence 1144 but continues to hold 100 per cent interest in licence area 1150. When contacted this week, a spokesperson for the board said that scenario remains unchanged.

As for the possible forfeiture of exploration deposits to the board, the spokesperson said a review is underway.

Meanwhile, as one company exits, another is about to enter.

Another state-owned company, QaterEnergy, has partnered with ExxonMobil Canada to explore another prospect in the Flemish Pass called Hampden, located in licence area 1165A.

The deal marks QatarEnergy's first attempt at offshore exploration in Canada.

Like CNOOC, the joint venture has also contracted the Stena Forth drill ship, with an exploration program planned for the second half of 2022.

Both prospects are not far from Equinor's massive Bay du Nord project, which received federal environmental approval in early April.

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