PanCanadian, Ocean Rig Partner on Deep Panuke

Carrying through on an earlier commitment to ramp up its Deep Panuke operations, PanCanadian Petroleum Ltd. has formed a partnership with Norwegian-based Ocean Rig ASA, which is expected to bring its deep-water drilling expertise to the Canadian East Coast. PanCanadian estimates that 1 Tcf of recoverable natural gas may be stored there at depths of more than 5,000 feet offshore Nova Scotia.

Under the partnership, PanCanadian will have access to Ocean Rig's Eirik Raude, one of the world's largest rigs, now under construction in Pascagoula, MS. The rig is one of two fifth-generation deep-water semi-submersible drilling rigs, known as Bingo 9000s, and it is expected to be ready for service by the first quarter of 2002. The other rig, Leif Eiriksson, is now being prepared for sea trials.

"There are a limited number of rigs in the world capable of drilling in this harsh environment and at depths of over 5,000 feet," said PanCanadian CEO David Tuer. "Through this arrangement, we have secured access to reliable, cost-effective drilling, and have positioned PanCanadian for enhanced business relationships with other operators in the region requiring these services."

During a news conference earlier this year, Tuer announced plans to ramp up PanCanadian's East Coast production, and committed C$1 billion to immediately begin commercial development (see NGI, March 5). The agreement with Ocean Rig, said Tuer, "demonstrates our commitment to the East Coast as a core area for further exploration and development."

PanCanadian has a "huge stake in Nova Scotia," said Tuer, and the company "absolutely thinks there is more gas out there" than the estimated 1 Tcf it hopes to produce.

PanCanadian holds extensive acreage off the Canadian East Coast, covering about 5.6 million gross acres, of which 4.4 million are offshore Nova Scotia. The company has an average working interest of 66% in 18 exploration licenses, and operates all but one of the licenses. Eight of the licenses are in deep water, and another 21 are owned by other exploration companies.

PanCanadian's deepwater work commitments total C$875 million over the next three-to-five years alone --- more than half of the total industry work commitments there of C$1.6 billion.

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