Petroleum Prospects On Canada's East Coast

SUMMARY AND CONCLUSION Canada's east coast play is worthy of the investor's consideration, as it still affords him the opportunity of participating at a relatively early stage in the area's exploration history. All multi-billion dollar world energy projects contain many inherent uncertainties which cloud the investment picture. Canada' s east coast is no exception. We have attempted to summarize these points for consideration: Negative Features the potential Canadian jurisdictional problem on ownership; the potential international ownership through the Law of the Sea Conference; the tax features which will replace the super depletion allowance, and the date they will become effective; stringent Newfoundland and Nova Scotia regulations; the technical problems associated with discoveries on the Labrador Coast and Davis Strait; and the National Energy Program. In comparison, we believe that the positive considerations to this play dwarf the present negative uncertainties. Positive Features the size of Canada's east coast offshore area, in relation to the drilling activity and results that have taken place to date; the relatively short period of time before production could commence from the Grand Banks and the Scotian Shelf areas; the development costs in relation to the estimated daily production volumes; the ready natural markets for both oil and gas; future drilling results (which can be both positive and negative); the estimated rate of return; and the potential rewards. FOREWORD Fish and lumber, the two principal staples which have played such a significant role in the economy of Atlantic Canada are about to be joined by a newcomer: petroleum, which will permit the region finally to obtain its long desired goal of a fully supportive economy. Many authorities believe that the Hibernia discovery well could become as famous as the 1947 Leduc wildcat which placed Alberta on the world oil map. The Canadian Government has termed Hibernia "the most significant discovery ever made in the Canadian offshore". Merrill Lynch Royal Securities Limited believes that the Hibernia discovery has made the east coast of Canada the number one offshore play in the world, and that it will remain so in the near future. With continued unrest in the Middle East, the importance of oil and gas reserves on Canada's east coast will obtain increased investor recognition. Although it is the government's intention to increase crude oil imports from Venezuela and Mexico, the Persian Gulf countries will continue to be the dominant supplier. Investor interest in the east coast play will primarily focus on oil; a field offshore Newfoundland with recoverable reserves of one half to one billion barrels will have immediate possibilities. Production could be on stream in four to five years, as natural markets are at hand. A natural gas discovery of sufficient size on either the Scotian Shelf at offshore Prince Edward Island would also be favourably considered. Production could commence within a reasonable time due to the fact that markets are at hand.