A unit of BP plc has captured a quartet of deepwater exploration blocks offshore Nova Scotia, with record bids totaling more than C$1.049 billion, according to the Nova Scotia Offshore Petroleum Board (CNSOPB). Shell Canada Ltd. won four offshore leases with offers totaling more than C$31.85 million.

The eight bids, which together totaled more than $1.081 billion, represent the amount of money the bidders intend to spend exploring the parcels over an initial six-year period of a nine-year license. Eleven blocks were up for auction; three received no bids.

“These represent the largest total bid amounts in response to a call for bids in Nova Scotia’s offshore area and for Atlantic Canada,” said CNSOPB CEO Stuart Pinks.

“Yet another company has seen the potential and strength of Nova Scotians, and made the largest single offshore bid in Atlantic Canadian history,” said Nova Scotia Premier Darrell Dexter. “This investment will mean more good jobs and hundreds of millions of dollars in revenue that will be used to improve health care, education and build roads to help make life better for Nova Scotia families.”

The previous high bids for an offshore auction in Nova Scotia were in January, when Shell spent C$970 million for four deepwater parcels (see NGI, May 7).

“That’s more than C$2 billion these two companies have committed to invest in Nova Scotia and its people,” Dexter said. “The fact that we now have two of the world leaders in oil and gas investing significant money in our province speaks to the confidence the industry has in Nova Scotia’s potential.”

Dexter noted that the CNSOPB has one of the most stringent regulatory regimes in the world. “Our province’s future depends as much on how we manage the environment as we do the economy. It’s a fine balance and this government takes that very seriously.”

BP Exploration Operating Co. Ltd. won Parcel Nos. 5-8 in the lease sale, NS12-1, with the largest bid for Parcel No. 7, which totaled C$637.977 million. Its second-highest bid was C$322.411 million for Parcel No. 6. The new deepwater blocks cover nearly 5,405 square miles (14,000 square kilometers) and are about 186 miles (300 kilometers) southeast of Halifax in water depths ranging from 328 feet to more than 9,843 feet (100 to 3,000-plus meters).

“This award gives us access to a significant piece of geology, one of the most promising new deepwater areas to be licensed in recent years,” said BP Vice President of Exploration Mike Daly. “Exploration is a key driver of future growth for BP, and access to prospective new acreage such as this is essential. This entry to Nova Scotia’s offshore plays to our strengths in the deepwater and sub-salt.”

The Nova Scotia leasehold adds to BP’s prowess in new exploration prospects, Daly noted. “In addition to deepening in our existing core areas, our drilling program is expected to test 15 completely new plays between 2012 and 2015,” he said.

Shell won Parcel Nos. 1-4, with its high bid on Parcel No. 3 for C$25.879 million. Two of Shell’s winning bids are in the Sable Island area and two are in deepwater.

The latest auction required that bidders for Parcel Nos. 3-8 have experience in exploring in water depths of more than 800 meters in the past 10 years. Both BP and Shell “have demonstrated that they have extensive worldwide experience in deepwater drilling,” the board noted.

The CNSOPB plans to issue the exploration licenses by Jan. 15, pending final approval by Canadian and provincial regulators, said Pinks. Successful bidders have to post a deposit of 25% of the amount of the bid to demonstrate their intention to conduct the work. Ninety days after the licenses are awarded, BP and Shell have to submit exploration plans to the board.

“It is important for our community to know that before any exploration activity can take place on these licenses, operators must demonstrate to the board’s satisfaction that such activities will be conducted in a manner which holds the health and safety of offshore workers and the protection of the offshore environment paramount,” Pinks noted. “The board’s robust regulatory processes will ensure that best practices, which continuously evolve, are implemented by operators carrying out petroleum activities in our jurisdiction.”

The next call for bids is to be issued in April. The CNSOPB also has a three-year plan for lands, which may be included in future lease sales.

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