Provincial government willing to extend deadline on $175M injection of public money into project
While no formal deal has yet been inked, there is growing hope in Newfoundland and Labrador’s oil industry about the future of the idled Terra Nova field, which has been out of production since late 2019.
In an interview with CBC News Monday, Energy Minister Andrew Parsons said “there are positive discussions occurring right now.”
When asked if he believes the Terra Nova will resume production at some point, Parsons said “yes,” but cautioned that the final decision rests with the oil companies.
“I think as a province, we’ve done everything within our power to assist the operator for the betterment of our province. But at the end of the day, it requires their signatures,” he said.
Suncor taking cautious approach
But the company that operates the field, Calgary-based Suncor Energy, is taking a cautious approach, stressing that no final decision has been made on whether to overhaul the aging floating, production, storage and offloading (FPSO) vessel, also known as Terra Nova.
“We’re continuing to progress work with the Government of Newfoundland and Labrador and joint venture partners to develop and evaluate options that could support a plan for long-term production at Terra Nova,” Suncor spokesperson Sneh Seetal wrote in an email Monday to CBC News.
One factor in the path forward is the cost of upgrading its subsea equipment — wellheads, manifolds and flexible flow lines — to determine whether a return to production is economically viable, said Seetal.
She said that analysis is underway.
What’s more, she said, all seven oil companies with ownership interests in the Terra Nova project will have to agree before any final decisions can be made.
As for the pledge by the provincial government to offer $175 million in public money to the project, and a willingness to give the oil companies a break on their royalty payments to the government, Seetal said the oil companies are appreciative.
“It helps give us certainty and clarity as we continue to evaluate and progress options for the asset,” she wrote.
But senior sources say the major partners in the Terra Nova oil field, including Suncor, which owns nearly 38 per cent, and 19 per cent owner ExxonMobil, are willing to proceed with the life extension project, and that discussions among all seven partners is ongoing.
The other partners include Equinor (15 per cent), Husky Energy/Cenovus (13 per cent), Murphy Oil (10.475 per cent), Mosbacher Operating (3.85 per cent ) and Chevron Canada (one per cent).
The Terra Nova FPSO has been tied up at the Bull Arm fabrication site in Newfoundland’s Trinity Bay for months, with no guarantees that it will ever return to the Grand Banks, where it began producing oil in 2002.
The vessel has not produced any oil since December 2019, after the agency that regulates the offshore — the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) — ordered Suncor to cease production because of safety concerns.
With the vessel’s design life expiring this year, the Terra Nova had been scheduled to sail to Spain in early 2020 to undergo what insiders say was a half-billion-dollar-plus refit.
This would have allowed the Terra Nova to produce an additional 80 million barrels of oil, and continue operating in the offshore for another decade.
But those plans were scuttled by the global pandemic, a resulting collapse in oil markets, and belt-tightening by oil companies as revenue streams began drying up.
Suncor has said it will not make any capital commitments for the Terra Nova this year.
Fearing the Terra Nova partnership might opt to decommission the project, the provincial government announced on Jan. 14 — the day before Liberal Leader Andrew Furey called a general election — that it had reached a non-binding memorandum of understanding with the oil companies.
MOU to expire at end of March
Under the MOU, the Liberals pledged to invest $175 million into the Terra Nova, and hinted at changes to the royalty regime, if the oil companies would match that amount, and commit to a long-term production plan for the Terra Nova.
The money is part of the $320 million the oil and gas industry recovery fund, which is funded by the federal government, but administered by the province.
The MOU is set to expire on March 31, but Andrew Parsons is suggesting that deadline is now flexible, and could be extended to the end of April.
That’s because the oil companies are continuing to map out a strategy, and the provincial government remains in caretaker mode because of the delayed election campaign, with the results not expected to be known until sometime in April.
“I do have optimism and I do think that there is a positive and that can come out of this,” said Parsons. “We’re always willing to entertain that because we want to see the best value for our for our resource. And also we want to see people working.”
Up until it was idled, the Terra Nova had produced some 450 million barrels of oil, while total direct employment in support of the Terra Nova oil field was roughly 850 people at the end of 2019, according to the C-NLOPB.
Many of those people have since been laid off following what’s been a devastating year for the entire offshore oil industry, with a series of sensational setbacks leading to massive job losses over the past 12 months.
If the Terra Nova is to receive an overhaul, Parsons said the province is keen to see as much of the work as possible carried out in Newfoundland and Labrador.
“We’re not just going to give away everything just to make this work. We have to be reasonable,” he said in an interview.
“I think we’ve been extremely reasonable. But the good news is that, as compared to a few months ago, the positivity is increasing and my level of optimism is as well.”
Source: CBC | This text was excerpted from the media outlet cited on March 22, 2021 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.