Vol. 26, No.23 Week of June 06, 2021
Providing coverage of Alaska and northern Canada's oil and gas industry

Major Newfoundland hit

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Terra Nova offshore field headed for shutdown as partners won’t fund revamping

Gary Park

for Petroleum News

All signs point to abandonment for Newfoundland’s Terra Nova offshore oil project as it faces what operator Suncor Energy calls a “brick wall” date on June 15.

Unless there is an unexpected turnaround by the consortium’s seven partners, the field will cease production, ending what has been almost two decades of operational problems.

The region’s other surviving offshore fields - Hibernia, White Rose and Hebron-Ben Nevis - all chose fixed production platforms, while Terra Nova opted for a floating production, storage and offloading vessel that has been tied up since the end of 2019.

The FPSO had been scheduled to head for Spain in early 2020 to undergo a C$500 million revamping that would have allowed the vessel to produce an extra 80 million barrels and extend its operating life by about 10 years, adding to the 450 million barrels that Terra Nova has so far yielded.

But Suncor Chief Executive Officer Mark Little has gradually been preparing Terra Nova’s 1,000 direct employees and the thousands of others in the supply and service sector for decommissioning of the FPSO.

Hopes fading

In a meeting with investors in late May, he said hopes of a renewed life have been fading, adding Terra Nova “does not look like it’s going to get there,” even with the Newfoundland government’s offer of C$175 million.

He said the challenges are compounded by weather conditions that affect plans to improve subsea equipment in the field.

Little was quoted in an independent oil and gas industry Internet news site as saying “it’s far easier to go into abandonment that it is to get an asset life extension approved.”

He told Bloomberg that “it’s heartbreaking to me to think this asset and the great people that operate it and maintain it that this operation could come to a premature end of life because of our inability to get alignment.”

SGovernment supportive

Newfoundland Energy Minister Andrew Parsons told reporters that his government has done everything to be supportive, but the task has been difficult with seven partners to deal with.

“Trying to get everyone in the same spot has been difficult. There’s no doubt we’re in a time of crunch now,” he said.

The Terra Nova partners are Suncor at almost 38%, ExxonMobil at 19%, Equinor 15%, Husky Energy/Cenovus 13%, Murphy Oil 10.475% percent, Mosbacher Operating 3.85% and Chevron Canada 1%.

Little declined to say which partners were standing in the way of an agreement, but industry sources point to ExxonMobil, which recently tried and failed to find a buyer for its stake.

Abandonment work required

In April, Suncor invited expressions of interest from companies that could do abandonment work on 30 wells ties to the production system, 11 other exploration and delineation wells, and to carry out decommissioning of the FPSO.

At the same time, Suncor has sought proposals from companies for the provision of subsea remediation and vessel services to support a modernization of the subsea facilities which lie 210 miles east of the Newfoundland capital of St. John’s.

A Suncor spokeswoman told the Canadian Broadcasting Corp. that the consortium is continuing to seek a deal with the Newfoundland government “to develop and evaluate options that could support a plan for long-term production at Terra Nova.”

For now, Suncor has sidestepped making any capital commitments of its own for the project in 2021.

In an 11th-hour bid to save Terra Nova, the Newfoundland and Labrador Oil and Gas Industries Association, with about 400 member companies, implored “all parties to find a positive resolution as soon as possible.”

In the first four months of 2021, Newfoundland’s three operating fields produced 33 million barrels, down 94% from a year earlier. Hibernia and White Rose are both rated as mature fields facing depleting reserves, while Hebron-Ben Nevis has been holding the line at around 150,000 barrels per day.

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