Page 5 - NorthAmOil Week 38 2022

NorthAmOil COMMENTARY NorthAmOil

Other priorities forfeit over CAD200mn ($145mn) in order to
While Woodside talked up the diversity of the abandon the two exploration licences.
portfolio it had gained via the merger, as well as “This will be a significant sum, and we’re
the growth opportunities it had gained across going to look at it internally,” Parsons said.
both the oil and gas and new energy segments,
it did not appear to view the Orphan Basin What next?
licences as core assets. In the company’s sec- Woodside’s withdrawal comes as a blow to New-
ond-quarter report, it showed that it had been foundland and Labrador, which hopes to reap
focusing its exploration drilling efforts on the US the rewards of further exploration and produc-
Gulf of Mexico. While two of the exploration or tion in its waters.
appraisal wells out of four listed had been drilled Parsons said the company’s move illustrated
before the merger was completed, this nonethe- the volatility of the oil industry, but that it came
less illustrated that Woodside’s focus was likely as no surprise in the wake of the merger.
not going to be on Atlantic Canada. “They’ve made a strategic decision that this is
In its report for the first half of 2022, Woodside not where their interests lie,” he said.
also mentioned seismic surveying work carried Parsons said he had met representatives of
out offshore Australia in May and Egypt in July. BHP prior to the merger, but had not had dis-
The company’s strategy when it comes to capital cussions with Woodside about its decision to Woodside was
allocation for offshore oil resources is to focus abandon the region. He added, however, that
on high-return assets that will be quick to bring there was nothing the provincial government not deterred by
to market, with a shorter payback period. It is could have done to make the company stay. the penalty it
seeking an internal rate of return (IRR) of 15% The province continues to hope that higher
and payback within five years. oil prices, as well as the recent federal approval was required to
Additionally, Woodside’s CEO, Meg O’Neill, of Equinor’s Bay du Nord project, will help
had recently talked up LNG as being the com- attract additional exploration to the region. The pay in order to
pany’s core product as it looked ahead to the government is targeting a doubling of oil pro-
coming years. duction to over 650,000 barrels per day (bpd) relinquish the
It appears likely that the Orphan Basin by 2030, as well as the drilling of over 100 new licences.
licences were not seen as being aligned with exploration wells over that period.
these targets, given their undeveloped nature The targets are ambitious given that oil and
and the higher risk this represents. gas companies continue to approach offshore
Indeed, Woodside was not deterred by the exploration with more caution, even in a higher
penalty it was required to pay in order to relin- oil price environment. However, a number of
quish the licences. Newfoundland and Labrador operators – including super-majors – are plan-
Minister of Energy Andrew Parsons told CBC ning to drill exploration wells in Newfoundland
News that when operators choose not to move and Labrador’s waters in the near and medium
forward with offshore exploration, they are term. The provincial government will be hoping
required to forfeit around 25% of the value of that the results of those exploratory efforts serve
their bid. As a result, Woodside would have to to encourage further drilling.™

Week 38 22•September•2022 www. NEWSBASE .com P5