(FORTUNE Magazine) – Runway in the same spot as last time?" That's our pilot talking with Sable Island, just making sure. Minutes later we're lifting off lightly from Halifax airport in a twin-prop Britten-Norman Islander. The photographer's in back, tethered to a hook (the plane's back door having been removed). I'm in the middle, tugging at my seat belt.

Rising over green-fingered coves and rocky coastal islands, we head out to sea with the late afternoon sun at our backs. After an hour or so a slim crescent of sand comes into view, trailing a spotty line of whitecaps like dust from a comet: Sable Island, isle of sand, graveyard of 500 vessels and 10,000 sailors. Twenty-seven miles from tip to tail and three-quarters of a mile wide at its gently swelling midpoint, it looks like a fleck on the eyeball of the North Atlantic. From the air we spot Gerry Forbes, the self-described "grand Pooh-Bah" of Sable, driving out to meet us in a blue GM pickup. Gerry first visited Sable when he was 31 years old. He's 47 now, a full-time resident for the past eight years. He oversees a revolving cast of half a dozen naturalists and meteorologists. Together they share the island with the harbor seals and a herd of wild horses. While we circle overhead, Gerry drives back and forth in straight lines on the beach, three or four times, then floats a windsock off his bumper. That's our runway.

Until recently Sable was known only to mariners, a landmark for Gloucester fishermen bound for the Flemish Caps. To set foot on it is to appreciate what it feels like to walk on the moon. Nothing to look at but a wall of green-tufted dunes. (The sand blends with the sea, and the curvature of the earth is plainly visible.) Nothing to listen to but the wind. But when I climb up into the dunes, I can hear the surf pounding on the windward shore. And when I look out over the water, I can see the rigs.

For decades oil and gas companies from all over the world have been quietly scoping the waters off Sable Island, poking around in a vast suboceanic formation known as the Scotian Basin. While the earliest discoveries date back to the 1970s, it wasn't until this past New Year's Eve that Sable Offshore Energy, a consortium led by Exxon Mobil, began producing on a grand scale. Today natural gas from three nearby reservoirs, 420 million cubic feet a day, converges at Sable's Thebaud platform (whose fire-tipped flarestack can be seen from the island) and flows into a 125-mile pipeline resting on the ocean floor. The pipe comes up out of the water at Betty's Cove on Nova Scotia's eastern shore, cuts through a rip in the forest to the new gas plant at Goldboro, then heads underground to market--650 miles down through New Brunswick, along the coast of Maine--until it rises again in a hissing, fenced-in nest of silver piping off a country road in Dracut, Mass., where it joins with the transcontinental North American pipeline grid.

The completion of the $2 billion Sable project (all figures are U.S. dollars) is the latest development in a massive effort that could one day transform Canada's impoverished Atlantic provinces into the planet's next great oil and gas frontier. Five hundred miles northwest of Sable Island, in the Jeanne d'Arc Basin off Newfoundland, the $3.7 billion Hibernia project, also led by Exxon Mobil, has been pumping oil at a peak rate of 150,000 barrels a day since late 1997. Government estimates of Hibernia's recoverable reserves keep rising--from 666 million barrels at the outset, to 884 million this summer, which makes Hibernia, in industryspeak, an "elephant." Total estimated reserves in the Jeanne d'Arc Basin: four billion barrels. (Proven reserves remaining in the entire U.S. Gulf of Mexico were last year just 2.7 billion barrels.) Just east of Hibernia lies the Terra Nova field, a $1.2 billion effort led by Petro-Canada, scheduled to begin producing oil next spring. Other big projects loom, notably White Rose (Husky) and Hebron (Chevron) in the Jeanne d'Arc Basin, and the second phase of Sable, scheduled for completion in 2006. Moreover, during the past several years companies have signed leases on dozens of undeveloped parcels off Canada's eastern shore, commitments likely to generate more than $1 billion of drilling and exploration over their five-year terms.

All that, plus the fact that the price of West Texas crude just passed $33 a barrel, a ten-year high, has folks in Atlantic Canada--the region with the country's lowest personal income, highest unemployment rate, and (in Newfoundland) a shrinking population--thinking maybe, finally, their time has come. "If you've got one project, you have an opportunity," says Debora Walsh, who manages the Halifax office of the Canadian Association of Petroleum Producers. "If you have more than one project, you have an industry. That's what we want--an oil and gas industry--so that people can develop the skill sets, stay in Atlantic Canada, and roll from project to project."

Walsh is a native Newfoundlander and a former consultant to the fishing industry. Her change in career speaks volumes about the shifts taking place all around her. The economy here has always centered on natural resources, be they coal, lumber, or fish. Oil and gas fit right in. But with fishing all you get are boats and canneries. (You also occasionally get something like the 1992 ground-fish moratorium, which killed cod fishing on the Atlantic seaboard and shot Newfoundland's unemployment rate past 20%; it's still 17%.) With oil and gas you get big projects like the Terra Nova, a gargantuan floating production platform now being outfitted at Bull Arm on Newfoundland's Trinity Bay. The hope is you also get a modern industrial infrastructure--not only the gamut of skills and technology needed to find oil and extract it, but also the promise of industrial spinoffs in every conceivable direction.

One example: Atlantic Canada today is among the last corners of North America not yet served by natural gas. It doesn't even have Canadian oil from Alberta (too expensive to transport). To this day the electricity plant across the harbor from Halifax is powered by imported oil. ("Dirty, scuzzy 2%-sulfur crude from Venezuela," says geologist Jack MacDonald of the Nova Scotia Petroleum Directorate, shaking his head.) But thanks to the opening of the Sable fields, gas is coming to Halifax this fall and may one day be plentiful throughout eastern Canada--a clean, reliable source of energy that could attract new industry.

Yes, this is all old-economy stuff, and much of the work the boom has brought is gritty, backbreaking, dangerous, and temporary. (Once the drilling is done and the rigs are in place, the need for manpower drops dramatically.) But the results are hard to argue with. Newfoundland has leapfrogged all other provinces to record Canada's highest growth rate, around 6%, in both 1998 and 1999. Nova Scotia is keeping pace with Canada as a whole. Much of the growth in both provinces has come from ambitious local entrepreneurs building capacity where none existed before.

Sandra Kelly, for one, the economic development minister for the government of Newfoundland and Labrador, is counting on the growth to continue. "There's incredible potential here between minerals and energy, and that will lead to a very stable future for Newfoundland," she says. "I think you'll see a reversal in the out-migration. We'll be like Ireland. People will return."

Halifax doesn't feel like a boomtown. It's too pretty for that, too civilized. It's an old garrison, a government center, home to several universities, and saddled, some would say, with a small-town mentality. "You don't want your neighbors to be far better off than you are," says a prominent resident, speaking privately. "People are resistant to change and resistant to success." But then you meet Fred Smithers, a native of nearby Dartmouth, and that notion flies out the window. Smithers, a glad, hearty, big-boned man with a little red mustache who married a war hero's daughter, once skippered a racing yacht called La Forza del Destino, and has built, in Secunda Marine, his own personal engine of economic growth.

Smithers used to be in the concrete business. In the early '80s, though, he got to know a fellow competitor on the Southern Ocean Racing Conference, Bert Keenan from New Orleans, who founded Offshore Logistics, an operator of supply vessels, helicopters, and airplanes serving the oil industry. Keenan wanted to expand into Halifax and asked Smithers to recommend someone local who might make a good partner. One thing led to another, and before long Smithers wasn't in the concrete business anymore. He was part owner of a supply vessel, then three supply vessels, under long-term contracts to Petro-Canada and Shell, running pipe, cement, barite, fuel, potable water--whatever needed toting to the exploratory rigs out by Sable Island.

Then, in the mid-'80s, the bottom fell out of oil prices. Keenan was looking to restructure his Halifax operation, and Smithers jumped in. He mortgaged his house, bought out Keenan (and his father-in-law), and started looking for new ways to generate cash flow. Soon he redeployed his supply ships in all kinds of creative ways: carrying cars and trucks to coastal communities in Newfoundland; ferrying passengers and cargo around northern Quebec; hauling lumber; outfitting an Alaskan fishing vessel; and laying underwater cables. "I looked at them not as supply vessels," says Smithers, "but as ships that could do whatever."

In the end Secunda Marine didn't just survive during the oil crisis; it thrived. So when the big oil companies started returning to Nova Scotia and Newfoundland in the early '90s, Smithers was ready. Today he operates 15 supply boats from docks in Halifax and St. John's (some of them old hulls salvaged in Russia and brought to Canada or the U.S. for complete overhauls), while still laying underwater cable on the side (35% of his business). He counts his revenues in the hundreds of millions. "It's here," says Smithers, nodding toward Halifax Harbour glistening in the bright northern sunshine. "It's starting to grow. There are little companies sprouting up all over the place."

While Halifax manages to disguise its budding prosperity behind a small-town demureness, St. John's is bursting with it. "You can feel the boom in St. John's," I kept hearing from everyone, and they weren't kidding. It's a muggy morning in late August. Gray water, gray skies, a sense of having come to the end of the earth, which is appropriate; nearby Cape Spear is the easternmost extremity of North America. But the harbor is buzzing. Personnel helicopters thump overhead, soaring out over the Narrows, bound for Hibernia and Terra Nova. Lines of flat-backed supply boats stack up at the Harvey Dock on Water Street, taking on cargo. Blue containers swing from a yellow crane over gangs of longshoremen in hardhats. A new civic center rises on the waterfront. And over at the old St. John's Dockyard, inside the cavernous, sky-lit factory, welders bend to the task, sparks flying all over the place.

The sign over the dockyard says NEWDOCK. It belongs to the Burry family, a clan of baymen (that's what they call you in Newfoundland if you weren't born in St. John's) who took over in 1997. There's a dry dock on one side of the yard (holding a Canadian naval vessel, in for repairs) and a machine shop and metal-fabrication plant on the other. The dockyard is going flat out now, mainly for the local rigs, but it also just landed a $1.5 million contract for an offshore-supply outfit in Houston. All told, it's a $20 million business, the son, Dan Burry, is proud to say. "Once Hibernia actually pumped oil, there was big excitement," says Burry, in the thick, almost Irish brogue that you hear all over Newfoundland once you get outside the city. "We realized there is actually a proven industry here, an industry born in Newfoundland."

For the most striking manifestation of Newfoundland's boom, however, it's necessary to drive an hour and half outside St. John's to remote, unpopulated Bull Arm. The first man-made object I see after curving down through rough pink clumps of fireweed is the Terra Nova's flarestack, poking up over the hills. Once I get around the next bend I see the mighty vessel herself. In the industry she's what's known as an FPSO, a floating production storage and offloading vessel. A mass of red metal so imposing, so improbably immense (the bulk of it doubled by the hard reflection in the plate-glass smooth bay), that it somehow fits in with the landscape. A man-made object so grand, that is, that it holds its own with nature.

It is crawling with Lilliputians in hardhats--steelworkers and pipefitters. The hull was built in South Korea, and much of the most sophisticated machinery was built under contract in Britain and delivered here for the final phase of construction. The site employs for the moment more than 1,300 workers, eight out of ten from Newfoundland, a lot of them ironworkers from nearby Conception Bay whose fathers and grandfathers built skyscrapers in Boston and New York after the war. The deck up front where the helicopters take off and land is 14 stories above the water. The flarestack, three football fields aft, rises 40 stories. Between the flarestack and the helicopter pad sits the turret, from which will descend the mooring chains and the mass of extraction piping. Once at sea, the turret stays always in one position, fixed to the ocean floor, while the vessel rotates to face the wind. Like a 40,000-ton weathervane.

If all goes according to plan, the Terra Nova will sail next March on a single voyage lasting less than 24 hours, drop anchor, and stay put for the next 20 years. (The ship can pull up lines and get out of the way of icebergs, if necessary.) One question is whether the paint job will hold up--turns out the best marine paint on the planet carries only a ten-year guarantee. The vessel has berths for 80 production workers but shouldn't require more than 50 at a time working 12-hour shifts, three weeks on and three weeks off.

The production process brings up oil, water, and gas in one dirty mix, which then flows through onboard separators. The gas is reinjected into the reservoir to maintain pressure. The water is purified and then dumped. "The oil, we save," says Gary Vokey, one of two rotating production chiefs on the Terra Nova. A native Newfoundlander, Vokey went to work right out of college for Petro-Canada--but not around here, there was nothing to do at the time--and was gone for 18 years. He once commuted from Calgary to an offshore job in Norway and says he can't pass through Heathrow Airport without running into someone he knows in the oil business.

In Newfoundland, if you weren't born here, you're a CFA, for "Come-from-away." But there's a new breed you run into a lot these days, thanks to the oil business: a CBFA, for "Come-back-from-away." Vokey's one of them. "Somewhere in the back of my mind I'd always hoped I could come back here in the position I'm in," he says. "But I knew I couldn't stay here and hope for it."

Dave Critch is another bayman, first mate of the What's Happening? out of Halifax Harbour. He's a fisherman's son who avoided following in his father's wake for 30 years, then succumbed after all, and has been fishing for the past ten years. He is just out of the shower now, standing on deck in clean work clothes, waiting for his captain to show up. Going out tomorrow afternoon for turbot, he says. He's done pretty well lately with snow crabs, but the future is uncertain. Everyone had to absorb a 30% cut in the quota this season, and Critch has heard rumors lately of another cut next spring. "The snow crab is not so plentiful, right?" he says. "Snow crab really got a lot of fishing since the moratorium, right? Everybody went at it, 'cause there's nothing else to go at."

Critch says he's never seen the oil rigs except on television--"We're going more northeast; the rigs is out here more to the eastern"--but he worries about what a spill could do to his livelihood. "Sooner or later there's gotta be a mistake," he says. "Only human to make errors. Basically that's all I know about the oil, right?"

But maybe not forever. Critch confesses that lately he's been eyeing all the activity in the harbor, wondering if somewhere in the midst of it all there might be an opportunity for a not-so-old fisherman like himself. "I was telling some of the boys there, I wouldn't mind trying to get on one of the offshore supply boats," he says. "Three weeks on, three weeks off, right? I wouldn't mind it. 'Cause I likes on the water, right? Something in the future to think about."

FEEDBACK: dwhitford@fortunemail.com