The principal reason why international oil companies (IOCs) such as Chevron, BP, and Exxon explore for oil in offshore and frontier regions is the rise in resource nationalism in oil producing regions, notably the Middle East, Russia, and South America. Rather than relying on IOCs, these regions often depend on their own national oil companies.
In Newfoundland and Labrador’s case, there are at least three additional reasons why deep and ultra-deep offshore exploration is being encouraged in places such as the Orphan Basin. First, because of depletion, production from the existing offshore plays (Hibernia, Terra Nova, and White Rose) has peaked and is in decline. Second, the next major play, Hebron, isn’t expected to produce first-oil until 2017. The third reason, which is the result of the first two, is that Newfoundland and Labrador is about to experience significant declines in offshore royalties.
Published, Globe and Mail, 4 June 2010