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Hibernia looks to cut spending amid COVID-19 crash in oil markets

From CBC News

The following text was excerpted from the media outlet cited on April 7, 2020 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.


Company ‘evaluating all appropriate steps to reduce capital and operating expenses’

There may soon be more bad news for Newfoundland and Labrador’s oil sector — this time at the project that launched the offshore industry more than two decades ago.

The Hibernia Management and Development Company says Hibernia production operations continue, but it is “looking to reduce spending as a result of market conditions caused by the COVID-19 pandemic.”

HMDC says it is “evaluating all appropriate steps to reduce capital and operating expenses in the near term.”

The company is notifying contractors, vendors, and others affected as decisions are being made.

HMDC did not provide further details, but said in a statement that “this process will be managed safely and with respect to all our employees and service partners.”

Hibernia became the first producing project in the Newfoundland offshore, pumping first oil in 1997, and celebrated its billionth barrel in 2016.

According to its benefits report for the last quarter of 2019, Hibernia employed 1,400 full-time equivalent workers. Some 92 per cent of them were residents of Newfoundland and Labrador.

Last year, CBC News reported that the consortium of companies behind Hibernia were considering more subsea drilling to further extend the life of the field.

At the time, HMDC had issued an expression of interest for companies who specialize in subsea dredging services, with work to possibly begin in 2021.

The shareholders of Hibernia are ExxonMobil Canada (33.125%), Chevron Canada Resources (26.875%), Suncor (20%), Canada Hibernia Holding Corporation (8.5%), Murphy Oil (6.5%) and Equinor Canada Ltd. (5%).

Series of setbacks for industry

The Newfoundland and Labrador oil industry has suffered a series of setbacks since the COVID-19 pandemic — compounded by a Saudi-Russia price war — crashed oil markets.

Last month, Equinor and its partner, Husky Energy, decided to shelve the $6.8-billion deepwater Bay du Nord prospect. The deferral was caused by the steep decline in oil prices and the general economic downturn related to the coronavirus.

And the owners of the Come By Chance oil refinery, which accounts for five per cent of the province’s gross domestic product, announced that the facility would be mothballed.