Thank you for the kind invitation to speak to you this morning from Houston. I'm here as part of a Canadian delegation promoting our offshore. You've pretty much seen a sample of that in that video.
The story I have to tell this morning is going to be one of geoscience and how the acquisition, interpretation, and dissemination of geoscience have really transformed our offshore in just a couple of years.
I have some prepared remarks. I'll go through those and then I'll be open to your questions.
Offshore oil was first produced in Canada—in Canada, of course, it's the “other” oil and gas industry, the offshore—20 years ago. Since then, over $120 billion in value has been created through investments of about $56 billion. From this, Canadians have received over $30 billion in tax and royalties, and many thousands and thousands of high-paying jobs. Those reserves are now more than half depleted, so what's next? Is there more oil to find, and how can we continue to attract exploration investment? How can the national energy data strategy help?
First, let's take a little closer look at those investments. Of the $56 billion in private sector investment, the most important type of expenditure by far is the one that carries the greatest risk. That is the exploration expenditure. Nearly $9 billion has been spent on exploration in our offshore over the last 50 years. These are expenditures that often have only a 15% or 20% chance of success. That's a significant level of risk. It's not often that you want to spend a dollar thinking you have only a 15% chance of getting a return.
Geologic risk, then, is the foundational risk. No other investments will occur unless this risk has been addressed and reduced to an acceptable level. Through the state-led provision of high-quality, timely, and competitive geophysical data, barriers to investment are lowered, timelines to development are accelerated, and safer, environmentally responsible operations can be undertaken.
There are more than 70 countries with some form of offshore oil and gas industry. That's 70. Annually, some 25 to 30 hold licensing rounds or land sales to compete for scarce dollars. Many of them are providing geoscience data and analysis to support those rounds. There is an intense competition for an annual investment pool of some $100 billion of exploration expenditures alone globally. More and more countries compete with Canada for this investment. They have recognized this and have ushered in an era of precompetitive geoscience gathering, processing, and promotion in order to attract investment through the reduction of risk.
For me, an oil industry veteran of some 25 years, it's problematic to consider that with the longest coastline in the world, Canada's offshore industry has hardly attracted any significant investment to date. In the 20 years prior to 2010, of the $100 billion potentially available, we had only attracted $100 million per year on average.
Historically, Canada has been a laggard, primarily because so little was known about our geology. What was know was tightly held by a few pioneering companies. In fact, a new investor considering Canada up to very recently would have only had access to 15- to 20-year-old seismic data captured with inferior technology, in limited areas, and made available only in paper format. Of course, this is a product that is essentially useless today.
Add to that no formal and predictable land tenure system, and Canada lost out on billions and billions of resource revenue and fell some 30 years behind Norway and its trillion-dollar pension fund.
However, since 2011 my company, Nalcor Energy, which is a crown corporation of Newfoundland and Labrador, has initiated a seismic program that today is one of the largest in the world. We have captured in six years as much data in our offshore as was captured in the previous 20. To complement this, in 2013 our regulator with both levels of government adopted a scheduled licensing round system that works hand in hand with this data acquisition to create a predictable process through which the resource potential can be delineated in advance of licensing rounds, allowing companies to prepare internationally competitive bids and through which this country can realize its maximum return for its acreage.
The result has been astounding. We've identified over 650 leads and prospects, including one we call Cape Freels, this being the closest landmark near this huge prospect. This prospect is estimated to hold over 12 billion barrels in place and has been called the most attractive undrilled prospect in the world today.
In these past three years, we have had over $2.6 billion in licence round bids since 2014, which is equal to the total amount of all bids received in the previous 30 years. This has been primarily as a result of our geoscience program.
We have also doubled the number of globally competitive oil and gas companies from just seven to 14 in those three years. This was all made possible by a subnational energy data strategy; what we need now is a national energy data strategy.
Further to the subsurface risks, we have now embarked upon the next phase of risk reduction by looking at the above-ground risks, as you have seen in the video, through data capture, interpretation, and sharing through our system called NESS. NESS provides key information about the province's basins, including weather patterns, historical well data and discoveries, and more, through a web-based interactive map that's freely accessible by everyone. You can check it out on your phones after this meeting. This is delivered at no cost to the user.
What can Canada do in this area of national energy data? I would recommend, and I strongly support, that in the formation of a new Canadian energy information agency, this agency co-operate with the provinces in the creation of a digital data repository based on the best practices seen in leading international jurisdictions.
One such system is the Norwegian Diskos Data Repository. This is a unique system that provides for an online downloadable interface for all sorts of data, and even acts as a functionality for data trading among member oil companies, which now number over 57.
In this system, the general rule is that all companies on the Norwegian continental shelf are required to submit copies of all raw data related to seismic activity and drilling to the Norwegian Petroleum Directorate, the NPD. The companies have to cover the cost of entering the data into Diskos, but this allows them to avoid the expenses of storing and administering the data on their own. All members have access to their own data in Diskos, and the data and licences in which they have an ownership interest. The authorities also encourage different licensees that are drilling in the same geological formations to exchange information they collect from their subsurface activities. This is a win-win for all parties.
The idea behind Diskos is that the oil companies should co-operate on storing and exploring for data and compete in the interpretation of this data. The more raw data that's collected and shared, the greater the possibilities for the bright minds in each company, and indeed for the authorities, in the effective management of their offshore.
The Norwegian authorities' overlying resource strategy lies behind the rules of data confidentiality. To encourage investors to conduct as much activity as possible, the investors gain exclusive rights to the data for certain periods. When the owners have extracted what they believe to be the true potential of the data, others can reuse that same information, reinterpret it, and reuse it to establish new plays.
The reuse strategy has been highly successful and has contributed to several major discoveries in recent years. More importantly, it allows new entrants to be more productive sooner.
In closing, the systematic and scientific approach to evaluating Newfoundland and Labrador's frontier basins identifies and addresses critical knowledge gaps that may exist and highlights key risk areas holding back industry investments. Providing a comprehensive data package to industry allows companies to plan for long-term exploration strategies to access new acreage.
These are early days, and there is much left to do. Nalcor will continue to make these investments and design geoscience programs to address key risks in a basin-by-basin approach. By guiding investments and activities strategically, Nalcor is positioned to make the right investments at the right time to unlock the next areas of offshore Newfoundland and Labrador that contain material prospectivity, ultimately delivering new resources for the benefit of Canadians.
Thank you.