Despite the price of oil hovering near $50 per barrel, Shell Canada (“Shell”) has announced it will continue exploring off the coast of Nova Scotia. Shell, along with its partners in the Shelburne Basin exploration project, ConocoPhillips and Suncor, will adhere to their existing plans for this year and the next. Exploratory offshore drilling is expected to commence in 2015.
Shell recently announced a worldwide overhaul of its exploration programs in response to the current price of oil. Over the next two years, Shell has reduced its planned expenditures for exploration by $15 billion. As a result, funding for exploration projects from the Gulf of Mexico to Asia will be postponed.
Shell’s CEO, Ben van Beurden, cautioned against a “slash and burn mentality” as a response to the price of oil. Mr. van Beurden indicated that the company is striking a balance between cost reduction and maintaining a growth pipeline for new resources.
ConocoPhillips has also reduced its worldwide expenditures on drilling and exploration programs and deferred major project spending. On January 29, the company announced a $2 billion reduction to its capital budget for 2015. However, ConocoPhillips has identified the Shelburne Basin project as an operational priority and confirmed exploratory drilling is on schedule for 2015.
In Nova Scotia, Shell has continued to award contracts in connection with the Shelburne Basin project. Most recently, Shell and HNZ Group Inc. (“HNZ”) entered into an agreement pursuant to which HNZ will provide offshore personnel and cargo transport, medevac and search and rescue services. HNZ expects the value of the contract during the initial period to be $20 million.
Shell’s Shelburne Basin exploration project consists of six exploration licenses that cover a contiguous area of 19,845 km2 located roughly 300 km off the coast of Nova Scotia. Shell, ConocoPhillips and Suncor are joint venture partners in the $1 billion offshore exploration project. Shell has a 50% interest in, and is the operator of, the project.
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