Terra Nova closed; White Rose blooms

Newfoundland’s offshore Terra Nova oil project is long past its shake-down phase, which gives added cause for worry as operator Petro-Canada turns what was supposed to be a 70- to 90-day refit this summer into a possible four-month shutdown.

A mechanical failure on the floating production, storage and offloading vessel, the FPSO, forced the operator to stop production May 7, six weeks ahead of schedule, and revise forecast second-quarter output to 21,000 barrels per day from a predicted 83,000 bpd and well short of the 119,000 bpd before the latest mishap, costing about US$234 million in lost revenues based on oil prices of US$70 a barrel.

Petro-Canada owns 33.99 percent of Terra Nova, ExxonMobil 22 percent, Norsk Hydro 15 percent, Husky Energy 12.51 percent, Murphy Oil 12 percent, Mosbacher Operating 3.5 percent and Chevron Canada 1 percent.

White Rose at 100,000 bpd

Compounding Petro-Canada’s embarrassment was word from Husky Energy that the White Rose field (Newfoundland’s third offshore producer) has achieved 100,000 bpd just six months after starting operations.

Husky CEO John Lau said the benchmark was reached after completion of a fourth production well and was ahead of the project timetable.

Not only is White Rose also using an FPSO, but Petro-Canada has a 27.5 percent working interest, with operator Husky holding 72.5 percent.

When the scheduled modifications to Terra Nova were first announced last fall, Petro-Canada CEO Ron Brenneman conceded that “design compromises” on the FPSO can’t be undone; the planned changes, expected to cost C$190 million, should improve reliability to 90 percent from 80 percent.

But the critics are reluctant to accept any promises, given that the project has been idled five times in the past 30 months, having started operations in January 2002.

Ian Doig, an offshore analyst, has rated Terra Nova an “operational disaster,” while Martin Molyneaux, with FirstEnergy Capital, has noted that only high oil prices have enabled Petro-Canada to avoid losses from the project over the past year.

Newfoundland Natural Resources Minister Ed Byrne gave a vote of confidence to Petro-Canada, saying once the maintenance is done “we are anticipating a higher production level and a more consistent production level.”

—Gary Park