The first Europeans ever to set foot on North America landed on this island more than 1,000 years ago before being forced from their settlements by native tribes. Now their descendants are back, and this time the locals are eager to keep them here.

In September, Norwegian energy company Statoil ASA announced a major oil find off the coast of this quaint harbor city, in the Bay du Nord prospect some 300 miles out to sea.

That Statoil discovered offshore oil close to this city was in itself not remarkable – the company later reported similar finds from its active exploration program in the North and Barents seas. But the announcement from Canada added greatly to the excitement felt in Newfoundland these days, since it came so soon after Statoil announced another major offshore energy find, at the Harpoon project back in June.

Statoil says it’s exploring off the coastline of Newfoundland and Labrador for the rich potential here. But the company admits that it’s also using eastern Canada as a springboard for a more ambitious, long-term goal to tackle energy challenges in the Arctic.

The weather conditions and geology here are similar to what Statoil is familiar with in the Norwegian North Sea region. The difference is the sea ice that floats down from Greenland every spring, giving the company an opportunity to experiment with sub-Arctic offshore drilling in Newfoundland before it ventures out to even icier Arctic waters, in Alaska and northern Russia.

Statoil representative Caron Hawco said her company is using St. John’s as a base for Arctic research and development, augmenting existing research capacity in Stavanger, Norway. Part of that effort includes assisting Memorial University of Newfoundland with developing its own specialized petroleum engineering program.

“From Statoil’s perspective, St. John’s is definitely an enabler for us going further north,” Hawco said. “We see our experience here and even the R&D that we do here can actually help to become a gateway to the Arctic or a business enabler to the Arctic.”

In 2008, Statoil was awarded 16 leases in Alaska’s Chukchi Sea. But with little supporting infrastructure, offshore exploration in Alaska is still in its infancy. Meanwhile, Statoil’s drilling is much more active in Newfoundland, even with the challenges of ice and harsh weather.

The team in St. John’s says the company is determined to become the lead operator of its own offshore project in eastern Canada.

Frontier finds

When residents of this city are asked which companies have made the biggest impact on the economy of St. John’s, they usually mention Exxon Mobil, Husky Energy or Suncor. With only smaller, nonoperating stakes in Newfoundland’s existing offshore projects, Statoil’s name isn’t mentioned first. The company estimates its share of production from those projects to be only about 13,000 to 14,000 barrels per day.

But Statoil is the most active explorer in east Canadian waters, evidenced by the announcement of its two major finds this year.

Bay du Nord could hold between 300 million and 600 million barrels of recoverable high-quality crude oil. Harpoon’s resources are still a bit of a mystery, but they look very promising, as well, said Atle Aadland, vice president for offshore upstream operations at Statoil Canada.

“It’s too early to say the size of this discovery. More work needs to be done on that one,” he said. “Even for the Bay du Nord, we know that we need to drill more wells, we need to take more seismic.”

At a briefing with reporters in Houston held earlier this year, company CEO Helge Lund said that prospecting for oil in these harsh, ice-strewn waters has become less of an unknown for Statoil’s Canadian operations.

“In some sense it’s de-risked because we see that there are hydrocarbons there in the area,” Lund said. “We are working on now a further exploration program based on the discoveries that we have made so far.”

Bay du Nord and Harpoon followed another Statoil major independent discovery here, Mizzen, announced in 2009. Exploration activity is concentrated in the Flemish Pass and Jean d’Arc basins. Jean d’Arc is home to the world’s largest offshore platform, Hibernia, and is the destination of the Hebron platform being built. Statoil is a nonoperating partner in both those projects.

Currently, the company counts five offshore Canada discoveries: Mizzen, King’s Cove, West Bombay, Harpoon and now Bay du Nord. Though Mizzen came earlier, company representatives said they may focus on Bay du Nord for a while.

Either way, the string of discoveries has Statoil convinced that its projects in Atlantic Canada have real potential. The firm shows no intention of leaving, as demonstrated by construction work at its offices here underway.

“We’re proving that our models are working,” said Hawco.

Late entrant

Canada, Alaska and other frontier regions are central to Statoil’s plans to compensate for declining production in the Norwegian continental shelf with growth overseas. In a recent report, Allen Good, a senior stock analyst with the investment firm Morningstar, said he believes Statoil can pull it off, but probably at a high cost.

“Given its previous experience, we believe Statoil can effectively compete with larger operators in some of these regions and deliver attractive returns,” Good said. “However, given its late entry, we worry about the company overpaying for access.”

Being a late entrant doesn’t worry them, company officials here insist. Good’s assessment also praises Statoil for its strong, leading performance in Norway’s North Sea environment.

Off the shores of Newfoundland and Labrador, Statoil feels right at home, Aadland said.

“We are the most active explorer in offshore Newfoundland,” he said. “This is a good fit for our base in Norway, where we’re coming from in the North Sea, because it’s a similar geology as well as environment in which we operate.”