In an announcement last week, the Canada-Nova Scotia Offshore Petroleum Board ("CNSOPB") has issued Call for Bids NS16-1 for Exploration Licences consisting of six (6) parcels of the coast of Nova Scotia. Three parcels are located in shallow water on the Scotian Shelf, south of Sable Island and are adjacent to current natural gas production from the Sable Offshore Energy Project. The remaining three are located further south of the first three on the outer shelf and slope of the central Scotian margin. As per the CNSOPB, exploration wells on two of the six parcels, namely parcels 1 and 4, have encountered significant quantities of natural gas in the past.
Two of the six parcels up for bidding have been nominated by the E&P industry which, amid the down-turn in global oil prices, is a testament to the potential this region has in attracting investment. It is anticipated that the bids received in response to NS16-1 will augment further more than $2 billion work commitments of BP, Shell, and Statoil that have been made since 2012.
Petroleum Rights and Term
Successful bidders will be awarded Exploration Licences pursuant to the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, S.C. 1988, c. 28, and the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation (Nova Scotia) Act, S.N.S. 1987, c. 3. The total term for an Exploration License will be for a period of 9 years divided into two phases i.e. Period One- 6 years and Period Two-3 years or the balance remaining out of the total of 9 years in case there is an extension granted in Phase One.
Important Considerations for Bidders
Some of the most important consideration for bidders include:
- Deadline for submission of Bids: 4:00 p.m. Atlantic Time on October 27th, 2016
- Bid Criteria: Sole criterion to be used for evaluating bids is the total amount of money proposed to be spent on exploration activity in the parcel within Period One with minimum bid requirement of CAD$ 1 million ("Work Expenditure Bid").
- Bid Deposit: A bid deposit of CAD $10,000 must be submitted to CNSOPB with every bid.
- Operating Experience Requirements: Submission of bids for parcels 4,5 and 6 which are in deeper waters require bidders to exhibit previous operating experience in waters beyond 800 meter depth.
- Work Deposit: In the event of a successful bid, the bidder is required to make a Work Deposit of 25% of the Work Expenditure Bid within 30 days of being notified that its bid was successful.
- ESRF Levy: Upon issuance of the Exploration Licence, the successful bidder must pay Environmental Studies Research Fund ("ESRF") levies under the Canada Petroleum Resources Act, R.S.C. 1985, for the year in which the licence is issued and retroactive levies for the two preceding years. The ESRF levy is administered by a separate board known as the Environmental Studies Management Board ("ESM Board") and is levied under the Canada Petroleum Resources Act, R.S.C. 1985. The ESRF levy is to be paid into an account designated by the ESM Board for a particular region. ESRF levy is determined by multiplying the number of hectares of land included in the licence by the ESRF rate for the applicable region determined and stipulated by the ESM Board.
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