|
Newfoundland's offshore lays claims to major supply status Terra Nova field on verge of start-up, White Rose gets government approval, but no move yet to tap Grand Banks natural gas, despite political pressure Gary Park Canadian Correspondent
Offshore Newfoundland is about to take its next step towards becoming the major oil supply basin in Canada after the Western Canada Sedimentary Basin.
Petro-Canada and its partners are in the final stages of commissioning the Terra Nova field, a C$2.9 billion project that is 35 percent over budget and a year late in coming on stream.
Labor strife in Newfoundland and technical hitches with the floating production, storage and offloading vessel or FPSO, have all conspired against cost estimates and scheduling for the 370 million barrel field.
But Terra Nova director of asset management Gordon Carrick said the problems were not out of the ordinary given that the mega-project has probably the most complex FPSO vessel in the world with the most complex turret.
Terra Nova was expected to enter 2002 with production at 125,000 barrels per day and has approval from the Canada-Newfoundland Offshore Petroleum Board to increase output to 150,000 bpd.
That compares with the Hibernia field, about 20 miles to the northwest, which was Canada's first major venture into offshore oil production when it came on stream four years ago, but has been afflicted with a wide variety of breakdowns and more natural gas in the reservoir than the production platform is designed to handle.
As a result the 700 million barrel Hibernia field has been struggling to keep its production rate at 140,000 bpd, when it has permission to pump at 180,000 bpd.
White Rose development approved At the same time Terra Nova is poised to make its debut, the Newfoundland government has approved a development plan for the 280 million barrel White Rose field, about 60 miles northeast of Hibernia.
Husky Energy Inc. the operator and 72.5 percent owner of White Rose, with Petro-Canada holding the remaining 27.5 percent, said it will decide within three months whether to proceed with the C$2.3 billion field has been targeted for start-up in late 2004 at 100,000 bpd.
The rest of the Grand Banks, which has attracted C$906.8 million in land sales since 1988, includes the Hebron-Ben Nevis field, which has 600 million barrels of heavy crude and could come on stream in 2006 at 100,000 bpd.
A series of satellite fields could yield another 90 million barrels of recoverable oil and help lift output to about 550,000 bpd, representing a major new frontier after the Western Canada Sedimentary Basin, which sprawls across most of Western Canada and currently accounts for about 95 percent of all Canadian oil and gas output.
Smaller fields economic Newfoundland Energy Minister Lloyd Matthews said the completion of Terra Nova and approval for White Rose are significant milestones for the province's petroleum industry. They demonstrate the industry's belief that it is economical to develop smaller fields.
They also signal the Newfoundland government's reluctant concession that the industry should be able to pursue the most economic production system, rather than bow to political pressure for maximum front-end jobs.
Husky, like Terra Nova's Petro-Canada, wants to build a floating production, storage and offloading vessel, which it estimates will cost only C$300 million, compared with C$1 billion for a gravity base structure similar to that employed for the C$6 billion Hibernia project.
Given the Grand Banks fearsome reputation for winds, waves and ice, the Terra Nova FPSO, with capacity for 960,000 barrels, has the ability to disconnect in 15 minutes when faced with a menacing iceberg.
It has five thrusters than can turn the platform into a self-propelled ship and a 200-foot turret that allows it to continue producing through racing storms by rotating the hull so that the bow always faces into the oncoming weather.
But Husky has been ordered to adapt the White Rose FPSO to accommodate a possible natural gas processing plant because the field contains at least 2.1 trillion cubic feet of reserves.
Offshore gas deemed uneconomic However, at this stage development of Newfoundland's offshore gas is deemed uneconomic, despite pressure from the Newfoundland government over recent years to accelerate gas exploration and development, even to the point of warning that oil development permits might be at stake.
But consultants and industry reports have repeatedly cautioned that forcing gas production on the operators could reduce oil recovery by denying those companies the right to re-inject gas to maintain reservoir pressures.
Even consultants from PanMaritime/Kenny-IHS Energy Alliance and Well Service Technologies Inc. partners in a C$685,000 study commissioned by the Newfoundland government ó said gas would be unlikely to come ashore from the Grand Banks for at least 15 years, so long as the reinjection practices continued.
Larry Wilcox, of Well Service, said the 11 Grand Banks fields contain about 5.34 trillion cubic feet of sales volume gas, of which 67 percent is associated with oil in the White Rose and Hibernia fields.
He said those two fields are the foundation for any gas development project offshore Newfoundland and it is the timing of the gas from these two resources which, to a large degree, will dictate the gas development.
Even if production from secondary gas fields could be accelerated, a 500 million cubic feet per day pipeline would operate at capacity for only a short period before slipping to 300 million cubic feet per day, said Wilcox.
Volumes of gas insufficient He said that attempting sales gas recovery in 2005,or even 2010, would be too early to ensure sufficient volumes to fill a 1 billion cubic feet per day pipeline.
Wilcox estimated that an additional 2.4 trillion cubic feet of reserves would be required to achieve a start-up this decade and an additional 5 trillion cubic feet would be the minimum needed to maintain pipeline capacity for 20 years.
Ray Young, business manager of the United Kingdom-based J.P. Kenny, said any pipeline from the Grand Banks would face the unprecedented challenge for an offshore petroleum project of dealing with icebergs, forcing operator to either bury a 150-mile pipeline deep enough to avoid that threat, or doubling the length of the line to bypass the icebergs.
Up against those odds, Petro-Canada vice president Norm McIntyre said his company is not ready to spend money to drill more wells to prove up additional gas resources, although he expects 12.6 trillion cubic feet of reserves will eventually be developed.
| 