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Terra Nova rescued; production to resume
Suncor, Cenovus, Murphy team up at endangered Newfoundland offshore operations with ‘crucial’ federal, provincial financial support Gary Park for Petroleum News
Out of the storm-tossed North Atlantic a surprise has surfaced.
Suncor Energy and Cenovus, two of Canada’s largest oil sands players, have come to the rescue of the region’s energy industry as global players head for the exits.
They announced an agreement to extend the life of the Terra Nova FPSO (floating production, storage and off-loading operation) by 10 years or about 70 million barrels, just when it seemed the likeliest outcome was the premature shutdown of the Newfoundland field.
The two companies announced they are taking full control of the field, located 210 miles southeast of St. John’s and are expecting to restart production in 2022. Murphy Oil will retain a small stake.
Under the restructured ownership, Suncor will control 48%, Cenovus 34% and Murphy 18%, while Cenovus will shuffle its assets in the White Rose project and a potential C$2.2 billion extension to West White Rose by lowering its working interest.
The deal includes royalties and financial support from the Newfoundland government totaling about C$205 million of the C$500 million the province committed to the project to provide up to 1,000 jobs linked to the oilfield that were lost in late 2019.
Since coming on stream in 2002 Terra Nova - one of four fields in the offshore including Hibernia, White Rose and Hebron-Ben Nevis - has produced 425 million barrels of oil.
FPSO to be refurbished The three Terra Nova partners said they will refurbish the massive FPSO that is 18 stories high and three football fields long.
Suncor Chief Executive Officer Mark Little said he appreciated “the deep collaboration and support from the (Newfoundland and Canadian) governments, which has been crucial to helping us reach this important milestone.”
Cenovus Chief Executive Officer Alex Pourbaix said extension of the asset’s life “provides a superior value proposition for our shareholders compared with the alternative of abandoning and decommissioning the project.”
Charlene Johnson, chief executive officer of the Newfoundland Labrador Oil and Gas Industries Association, said Terra Nova “once looked perilously close to never returning to production. Now we will see work begin immediately.”
The four companies that have bailed out of Terra Nova include ExxonMobil (once a 19% stakeholder); Norway’s Equinor (which sold 15%, but which still plans to develop Newfoundland’s Bay du Nord oil field); Mosbacher Operating (which sold its 3.85%) and Chevron (which unloaded its 1%).
Equinor executive Vice President Al Cook said his company can continue producing oil at sites such as Bay du Nord with significantly lower carbon emissions than comparable operations.
“In a world that cares more and more about carbon, we see this as a competitive advantage,” he said. “In every country where we are an operator we are actively targeting emissions reductions.”
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