Mr. Chair and committee members, thank you for the opportunity to speak here today.
I'm representing Nalcor Energy, the provincial energy corporation of Newfoundland and Labrador on the issue of proposed amendments to the Coasting Trade Act, amendments that we support.
We're at a time and place in Atlantic Canada where new exploration is necessary to grow the oil and gas industry and find Canada's future offshore oil fields. The Canadian offshore is under-explored relative to other competitive jurisdictions, leaving us with significant potential for future discoveries.
The exploration for new discoveries of oil and gas is a globally competitive business that is conducted in a highly technical, process-driven fashion. Canada competes for exploration investment against other areas of the world, such as Brazil, West Africa, Australia, the U.S. Gulf of Mexico, and the North Sea, to mention a few. Seismic data acquisition is one of the earliest phases of oil and gas exploration and one that plays a critical role in unlocking presently undiscovered oil and gas resources.
To decide in which region to explore, global oil and gas companies use data—in particular seismic data—to locate highly prospective regions on which to focus their exploration activity. In a global exploration portfolio, companies have the option to explore where appropriate amounts and quality of seismic data can effectively reduce their exploration risk, making high-quality seismic data essential to follow-on exploration activity.
In Newfoundland and Labrador, Nova Scotia, Norway, and many other jurisdictions, strong correlations exist between the amount of 2D seismic data and the amount of exploration drilling. Historically, in Newfoundland and Labrador, seismic data acquisition proportionally results in exploration drilling in the years that follow. This makes sense, because seismic data provides images of the subsurface, much like a CAT scan of the earth, and helps identify prospective targets for oil and gas drilling.
Any impediment to acquiring seismic data directly impacts the number of wells drilled, and consequently the likely number of future discoveries. The existing potential of our offshore industry in Newfoundland and Labrador is substantial. Our offshore sedimentary basin areas are larger than both the offshore United Kingdom and offshore Norway. While our basins are significantly larger, our rate of exploration and appraisal well drilling has been much lower, despite similar success rates per well.
Across the basins, the U.K. has a well density of approximately one well for every 139 square kilometres; Norway, one well per 461 square kilometres. Newfoundland and Labrador has one well for over 4,000 square kilometres. For comparison, the world-class Hibernia oil field, off eastern Newfoundland, is approximately 150 square kilometres, meaning that a number of new fields could exist in our existing sparse well coverage. This low historical exploration level is despite Newfoundland and Labrador's average oil discovered per exploration and appraisal well being in the range of these other jurisdictions.
While it's understood that the intent of the Coasting Trade Act is to protect Canadian interests, in its application on foreign-flagged seismic vessels this process is inadvertently working against Canadian interests by reducing our global competitiveness in exploration. This impacts two key areas of offshore exploration in relation to seismic data.
Many offshore discoveries in Newfoundland and Labrador were initially imaged through multi-client data, where a group of companies get together and share the risk and costs. The number of multi-client surveys conducted offshore of east coast Canada has been reduced significantly, because when objections raised about these surveys by foreign-flagged vessels are sustained, the surveys have rarely proceeded, using the Canadian-flagged vessel offered as a substitute. The cancelled survey means no data is acquired, no resulting wells are drilled, and no additional discoveries are made.
Since 2001, 34% of all seismic surveys by non-Canadian flagged companies have been objected to under the Coasting Trade Act. The objections create uncertainty in our jurisdiction for global seismic companies looking to acquire multi-client data, who then in turn direct their exploration investment activity to more healthy environments in other countries outside Canada.
Cabotage laws in the United Kingdom, Norway, the United States, and Brazil, to mention a few examples, do not impede the importation of foreign-flagged seismic vessels into their countries. The U.S. Jones Act, which requires not only U.S.-flagged vessels but U.S.-built vessels in many marine categories, also recognizes this technologically specific industry and allows for foreign-flagged seismic vessels to conduct surveys.
The value of the offshore development that results from offshore exploration, starting with seismic exploration, is important to Newfoundland and Labrador and to Canada. The nominal value of an average oil field discovered in offshore Newfoundland and Labrador would see about $12 billion returned in taxes on oil sales to Canada's federal government. These figures are based only on the corporate tax on oil sales.
In conclusion, to fully realize Canada's exploration potential, exemption of seismic activity from the Coasting Trade Act as proposed in the budget will help make Canada competitive with other resource jurisdictions around the world in attracting front-end global exploration investment to our country. Based on our past success in drilling and our vast area of under-explored basins, we feel that increased exploration activity will ultimately lead to new discoveries for the benefit of Canadians.