Nova Scotia Offshore Blocks Drawing “Considerable Interest”

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June 25, 2012

A total of 11 offshore energy exploration parcels that are up for bidding in November, six of which are industry nominated.

OTTAWA–Nova Scotia is drawing “considerable interest” for 11 offshore energy exploration parcels that are up for bidding, after Royal Dutch Shell PLC (RDSA) won an earlier round with a record bid, Premier Darrell Dexter said in a telephone interview Monday.

Mr. Dexter declined to be more specific, saying only that geographically, the interest is coming from “across the spectrum.”

Bids for the parcels, covering a total of about 7.7 million acres, close Nov. 7.

The Nova Scotia government has estimated that its offshore region potentially contains 120 trillion cubic feet of gas and 8 billion barrels of oil.

Shell in January won exploration rights to four parcels with a 970 million Canadian dollar (US$947 million) bid, a record figure for offshore drilling rights on Canada’s east coast. This is the amount Shell plans to spend on exploration in the area over six years.

Mr. Dexter said he discussed the program with Shell Canada President Lorraine Mitchelmore at a meeting in Calgary, Alberta last week. He said Shell is “very positive” and “looking forward to proceeding with the exploration.” He said the company will conduct seismic work in the parcels and then decide where to drill.

Nova Scotia gets royalty payments from energy projects and Mr. Dexter acknowledged that as a natural-gas producer, the province has “suffered a pretty severe hit” from falling prices.

He’s hoping new energy and other projects, including a C$25 billion federal contract awarded to Irving Shipbuilding in Halifax, Nova Scotia to build combat ships for the Canadian Navy, will boost the local economy and create jobs in a province where the unemployment rate of 9.2% is almost two points higher than the national average. The shipbuilding project is expected to create 11,000 jobs, he said.

Mr. Dexter is worried about the euro-zone crisis, which he said has had a “profound” effect on the province’s paper industry. The depreciating euro has created a “currency premium” for European pulp and paper companies which sell on international markets “at a considerable advantage,” and led to the recent closure by Resolute Forest Products Inc. (RFP) of the Mersey paper mill in Brooklyn, Nova Scotia. The facility is a joint venture between Resolute and the Washington Post.

Like his federal and provincial counterparts across Canada, Mr. Dexter is looking to boost trade ties with Asia. As chairman of the Council of Federation, a group comprising premiers of Canada’s 10 provinces and three territories, he will lead a trade mission to China in September.

Nine jurisdictions have confirmed participation in the mission. “We are building our links to that market every day.” Mr. Dexter said. Nova Scotia has “wide and diverse interests” in China, mostly related to the marine industries, including seafood and oceans-related technology and “this is a great opportunity for us to be able to expand those relationships,” he added.

Mr. Dexter is also eyeing other markets in Asia. He was in Vietnam recently to promote direct trade through the Port of Halifax “and building on the fact that we have a great port of entry into the North American market for India, for Vietnam for South Korea,” he said.

-Nirmala Menon

Copyright © 2012 Dow Jones & Company, Inc.

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