OSLO, Nov 16 (Reuters) – Norway’s Statoil risks millions of dollars in extra costs in Canada – a test case that could spell problems for other oil firms too as coastal states extend their seabed territories far into resource-rich ocean depths.
Coastal nations are using U.N laws to extend and define new limits to their seabed territories, pushing beyond a previously established 200-nautical mile (370 kms) zone for drilling and mining as technology opens new frontiers in finding deepwater oil and gas.
But that extended territory comes with a bill to pay a percentage of future revenues to the U.N. body that monitors the international seabed – something governments are seeking to pass on to oil and mining firms.
The rules – articles of the U.N. Convention on the Law of the Sea – have thus far been irrelevant because the regions beyond the previous limit are so remote they would have cost too much to develop.
But industry advances have lately opened up huge deepsea possibilities from the Arctic Ocean to the Pacific: specialist firm Transocean drilled a well in a record 3,174 metres (10,411 feet) of water off India last year.
Dozens of states have made submissions to the U.N. Commission looking at seabed rights.
However all eyes are on Canada’s extended territories as the test case for oil companies because Statoil has found potential new fields there. Assuming oil production goes ahead, Canada and Statoil will be the first to become liable to Article 82 – the part of U.N. law that lays out the terms of the payments to the International Seabed Authority (ISA).
The payments start at one percent of revenues in the sixth year of production and rise by one percentage point a year to a maximum of 7 percent from the 12th year.
“It does seem likely that the Statoil field will be the first Article 82 area to go into production,” said Michael Lodge, legal counsel to the Jamaica-based ISA, which would collect revenues and redistribute them, mostly to developing nations.
WORKING OUT COSTS
Statoil this month started appraisal drilling, the second step after initial exploration, with its partner Husky Energy , 270 nautical miles (500 kms) off Newfoundland in Canada – a remote area near where the Titanic sank in 1912.
It estimates that finds off Canada in depths of about 1,200 metres at the Bay du Nord field could be 300-600 million barrels of recoverable oil, another at its Mizzen field 100-200 million. A third find, Harpoon, has yet to be fully assessed.
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