Saving Terra Nova
Click here to go to the full PDF version of this issue, with any maps, photos or other artwork that appears in
some of the articles.
Suncor Energy could boost stake to 48%; several current owners expected to quit
for Petroleum News
The Newfoundland government, oil industry associations and labor unions may have moved what most thought was immovable.
Suncor Energy, under intense pressure, has crafted an 11th-hour tentative agreement with its six co-owners to extend production at its Terra Nova offshore field.
If all parties endorse the agreements in principle announced on June 16, there will be a shuffle of the ownership positions and short-term funding for the project that Suncor was on the cusp of decommissioning.
“Although this agreement in principle is not a guarantee, it sets a path forward in the next few months to secure a return to operations for many years to come,” said company Chief Executive Officer Mark Little.
80 million barrels remainingBy Suncor’s estimate Terra Nova still has 80 million barrels of recoverable crude after recovering 425 million barrels since the project came onstream in 2002 and peaked at about 76,000 barrels per day.
Production was halted at the end of 2019 while the consortium pondered whether to either bail out of the venture or embark on upgrades costing an estimated C$600 million, mostly involving its floating production, storage and offloading vessel that has storage capacity of 960,000 barrels.
Suncor said that in addition to needing ratification from its partners it requires confirmation of a previously announced offer of C$500 million in royalty adjustments and financial support from the Newfoundland government, which had previously rejected a request from the companies to take a 15% equity stake.
Little said that “despite numerous setbacks, Suncor, as operator, continued to persevere and explore options to achieve an economic return for our investors” while protecting the employment of hundreds of Newfoundlanders.
Until the agreements are finalized there will be no further disclosure of the details, including which companies will be selling their stakes and for how.
Direct employment down to 445Since production was halted, Terra Nova Has reduced its direct employment to 445 from just over 1,000.
Dave Mercer, president of Unifor Local 2121, said the reversal was an enormous relief for workers who faced the loss of employment and possibly their mortgages.
“Don’t get me wrong,” he said. “There is still a lot of paperwork to be done. But it’s the best we could have hoped for at this time.”
Newfoundland Premier Andrew Furey and Energy Minister Andrew Parsons said they were “optimistic there will be even brighter days ahead for the employees and our province.”
Parsons said the tentative agreement validates his government’s decision to offer royalty relief and cash.
“The offer we made was good and right,” he said.
The present ownership positions are Suncor at 38%, ExxonMobil 19%, Equinor 15%, Cenovus Energy 13%, Murphy Oil 10.475%, Mosbacher Energy 3.85% and Chevron 1%.
Sources in the consortium have said Suncor is prepared to raise its share to 48%.
They also expect to see ExxonMobil, Equinor, Mosbacher and Chevron bail out of the partnership.