A quarter-mile beneath the Gulf of St. Lawrence in the waters between Quebec and Newfoundland lies the Old Harry formation, an uncharted prospect that could hold some 5 Tcf of natural gas or 2 billion barrels of oil, the largest offshore reserves in eastern Canada.
But, despite the promise of the reserves, political tensions have held up progress toward production, as provincial governments spar over the land and royalty rights on the land the formation spans.
"The Old Harry prospect is a significant oil and gas resource that has not been explored because of political uncertainty, both at the federal and provincial levels," said Peter Howard, president of the Canadian Energy Research Institute.
With Canadian supplies slowing down, products from Sable Offshore Energy project increasingly in question and LNG going to higher prices markets, Eastern Canada -- with its aggressive provincial moves away from coal and toward gas -- is in dire need for new gas sources.
Named after the closest village in the nearby Magdalen Islands, Old Harry straddles the border between Newfoundland and Quebec, which claims about two-thirds of the resource under a 1964 maritime boundary.
Corridor Resources, a Nova Scotia-based producer that holds exploration licenses for much of the prospect, is testing the formation with plans to drill exploratory wells by the end of 2012.
A geohazard survey completed in the fall tested seafloor sediments and tried to identify other significant seafloor features in the first steps of developing a plan for exploration.
Corridor's chief geophysicist Paul Durling said the company is in the middle of filing for permits with Newfoundland to further explore the space to map out Old Harry's unknowns, namely what hydrocarbon would dominate.
"The basin is a coal-rich basin, so we are looking at oil-rich source rocks. That could be an either-or for oil or gas. It would be fairly light oil," Durling said.
He said, however, that Corridor is cautiously proceeding in to the next steps of exploration, given the political climate. "It's a fairly sensitive area. We have to make sure the right process is in place," Durling said.
The license Corridor was issued by the Canada-Newfoundland Offshore Resources Board, but only applies to about 125,000 acres of the Newfoundland section.
The Quebec section remains under question, as Quebec has been under an offshore drilling moratorium that has been in place on the province's offshore territory since 1997.
Talks have been ongoing between Quebec and federal officials in Ottawa, but have not produced results.
"A deal has not yet been struck between Quebec and the federal government for offshore exploration," said Edward Kallio, director of gas consulting for Ziff Energy Group.
Howard said Quebec has long been hostile to federal governmental control over the offshore territory, and monetary considerations would likely be at the top of the list of issues.
"Quebec does not recognize the federal government's control over the area and would be demanding all royalty payments," Howard said.
Quebec's Natural Resources ministry did not return a call seeking comment.
For Corridor's part, the timeframe is tightening. The Newfoundland license expires in 2013. Durling said plans are now to start exploration within the next two years, though extensions could be taken on the license.
Howard said, at twice the size of the Hibernia field, the oil reserves alone would be an attractive proposition, given the short distance to refineries.
"I am not sure what the economics look like, but an oil play in close proximity to both the Montreal and Ontario refineries would definitely benefit Quebec," the CERI chief said.
Further, Quebec, which is dependent on imports to satisfy its needs for natural gas, could be served by Old Harry's reserves for the next 20 years or more, according to the National Energy Board.
But, despite the promise of the reserves, political tensions have held up progress toward production, as provincial governments spar over the land and royalty rights on the land the formation spans.
"The Old Harry prospect is a significant oil and gas resource that has not been explored because of political uncertainty, both at the federal and provincial levels," said Peter Howard, president of the Canadian Energy Research Institute.
With Canadian supplies slowing down, products from Sable Offshore Energy project increasingly in question and LNG going to higher prices markets, Eastern Canada -- with its aggressive provincial moves away from coal and toward gas -- is in dire need for new gas sources.
Named after the closest village in the nearby Magdalen Islands, Old Harry straddles the border between Newfoundland and Quebec, which claims about two-thirds of the resource under a 1964 maritime boundary.
Corridor Resources, a Nova Scotia-based producer that holds exploration licenses for much of the prospect, is testing the formation with plans to drill exploratory wells by the end of 2012.
A geohazard survey completed in the fall tested seafloor sediments and tried to identify other significant seafloor features in the first steps of developing a plan for exploration.
Corridor's chief geophysicist Paul Durling said the company is in the middle of filing for permits with Newfoundland to further explore the space to map out Old Harry's unknowns, namely what hydrocarbon would dominate.
"The basin is a coal-rich basin, so we are looking at oil-rich source rocks. That could be an either-or for oil or gas. It would be fairly light oil," Durling said.
He said, however, that Corridor is cautiously proceeding in to the next steps of exploration, given the political climate. "It's a fairly sensitive area. We have to make sure the right process is in place," Durling said.
The license Corridor was issued by the Canada-Newfoundland Offshore Resources Board, but only applies to about 125,000 acres of the Newfoundland section.
The Quebec section remains under question, as Quebec has been under an offshore drilling moratorium that has been in place on the province's offshore territory since 1997.
Talks have been ongoing between Quebec and federal officials in Ottawa, but have not produced results.
"A deal has not yet been struck between Quebec and the federal government for offshore exploration," said Edward Kallio, director of gas consulting for Ziff Energy Group.
Howard said Quebec has long been hostile to federal governmental control over the offshore territory, and monetary considerations would likely be at the top of the list of issues.
"Quebec does not recognize the federal government's control over the area and would be demanding all royalty payments," Howard said.
Quebec's Natural Resources ministry did not return a call seeking comment.
For Corridor's part, the timeframe is tightening. The Newfoundland license expires in 2013. Durling said plans are now to start exploration within the next two years, though extensions could be taken on the license.
Howard said, at twice the size of the Hibernia field, the oil reserves alone would be an attractive proposition, given the short distance to refineries.
"I am not sure what the economics look like, but an oil play in close proximity to both the Montreal and Ontario refineries would definitely benefit Quebec," the CERI chief said.
Further, Quebec, which is dependent on imports to satisfy its needs for natural gas, could be served by Old Harry's reserves for the next 20 years or more, according to the National Energy Board.
