Chevron Sticks to New Projects in Canada & China Despite Dry Holes

Energy giant Chevron (NYSE:CVX) plans to continue with its drilling efforts in the Canadian state of Newfoundland despite encountering two dry holes, according to Bobby Ryan, VP for global exploration at the company. ^[1] Chevron is going ahead with its plans in the Orphan basin off Canada’s east coast after replacing its former funding partners Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS) with European players Repsol YPF and Statoil. Exxon pulled out of the venture earlier as it failed to strike oil in the first two attempts. Ryan also said that Chevron is drilling a second hole in the deepwater Pearl River Mouth Basin in China after the first drilling attempt yielded no results.

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Continued optimism

Despite encountering two dry wells off Newfoundland, Chevron is confident that further exploration in the region may bear fruit.  Ryan said that its previous efforts had resulted in the company learning a lot about the area’s geography that will direct its future drilling efforts. ^[1] The Orphan basin covers over 150,000 sq. kilometers and water depths in the region range between 200 and 3,000 meters. ^[2] Exploration permits for the region were first issued back in 1970s but explorers did not encounter much success keeping interest levels in the industry low. It remains to be seen whether Chevron can make any significant discoveries in the region with its ongoing project.

Canada is the largest source of imported crude for the U.S. Chevron and other oil majors are increasingly focusing on deepwater exploration to prop up production levels. Higher deepwater exploration is expected to result in an increase in the company’s capital exploration outlay for the future.

Chevron also revealed that it was continuing with its plans to drill deepwater wells in the Pearl River Mouth Basin in China. Its first well in the region resulted in a dry hole but the company plans to drill one well in each of its three blocks in the region. ^[1] Chevron will also begin work on an offshore well in Liberia by the end of this quarter. Among the onshore projects lined up for this year, Ryan said the company plans to work on multiple wells in the Duvernay shale region in Alberta, Canada.

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1. Chevron: “No success” at 2nd well off Newfoundland, Reuters [↩] [↩] [↩]
2. HYDROCARBON POTENTIAL OF THE ORPHAN BASIN OFFSHORE NEWFOUNDLAND, Geophysical service [↩]