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Husky, Petro-Canada, proceed with East Coast oil project Decision reverses a stream of setbacks for Newfoundland offshore, as majors pull back from ventures, land sales decline and existing fields grapple with cost overruns Gary Park PNA Canadian Correspondent
Canada’s floundering East Coast offshore has been kept afloat with the decision by Husky Energy Inc. and Petro-Canada to proceed with the C$2.35 billion White Rose oil project. Against a background of hefty cost overruns on Newfoundland’s first two developments (Hibernia and terra Nova), a virtual pull-out by Chevron Canada Resources and ExxonMobil Corp. from the region and slumping land sales, White Rose was seen by many observers as questionable.
Husky will be 72.5 percent operator of the field, which is expected to come on stream by late 2005 — one year behind schedule — and average 92,000 barrels per day over 10 to 15 years.
The White Rose field contains three pools, with initial development focussing on the South Avalon pool, which is estimated to hold up to 250 million barrels.
On top of the capital costs, primarily for a floating production storage and offloading vessel, the lifetime operating costs are at C$2 billion, or C$3.30 per barrel of oil. Lift chances of sale Analysts also say Husky’s decision to proceed will lift its chances of concluding the sale of Canada’s smallest integrated oil company, with PetroChina and TotalFinaElf seen as leading contenders.
Wilf Gobert, with Peters & Co., said White Rose injects some “pizzazz” into Husky’s asset mix that should be “very encouraging” to any prospective buyer.
William Roach, Husky’s general manager of East Coast operations, said he is confident the extra time taken to evaluate costs will allow White Rose to be completed on time and on budget.
Many hard lessons were absorbed by Petro-Canada, as 33.9 percent operator of Terra Nova and a partner in Hibernia, both of them plagued by long delays and cost overruns, with Terra Nova exceeding its original budget of C$2 billion by C$900 million.
That jolt, combined with Chevron’s decision to shelve its 400 million to 700 million barrel Hebron-Ben Nevis planning, ExxonMobil’s move to jettison nine of 10 exploration licences in the Jeanne d’Arc Basin and Flemish Pass and the sharp dive in offshore land sales in the last three years had many observers predicting a sudden end to Newfoundland’s hopes of creating a new oil frontier. Project could be sunset The pressure was building on the Canadian government, as owner of the offshore resources, to devise a new land tenure system which would attract a broader cross-section of companies and move beyond the current “closed shop” that exists for a handful of companies.
While White Rose is a “huge shot in the arm” for the region, Gobert said it could also be a “sunset” project unless there is a resurgence of exploration to break a 17-year drought in new discoveries.
But he said White Rose should be able to achieve its goals because it is less technically challenging than Hebron-Ben Nevis, which contains heavier oil than the nearby fields and would require more wells to produce.
Hebron-Ben Nevis holds several different deposits of oil and is geographically too spread out to be commercially viable, Gobert said.
Editor’s note: Petro-Canada is a new leaseholder in Alaska’s Brooks Range foothills.
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