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Tentative deal on restructuring of Terra Nova offshore project means ‘immense relief’ for Newfoundland and Labrador offshore sector

ST. JOHN’S, N.L. — The operator of the Terra Nova offshore oil project says it and other stakeholders have reached an agreement in principle to restart the project, potentially saving hundreds of jobs in Newfoundland and Labrador.

The announcement came in a Wednesday-evening news release from Suncor Energy, which said says there is an agreement in principle to restructure the project ownership and provide short-term funding towards extending its production life, with the intent to move to a sanction decision in the fall.

A subset of owners will increase their ownership of the project for consideration payable from the other owners. Suncor’s ownership will increase to 48 per cent from approximately 38 per cent.
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“Over the past year, Suncor has worked diligently with all stakeholders to determine a path forward for Terra Nova,” said Mark Little, Suncor president and CEO in the release. “Despite numerous setbacks, Suncor, as operator, continued to persevere and explore options to achieve an economic return for our investors while protecting the employment of hundreds of Newfoundlanders and Labradorians.
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“Although this agreement in principle is not a guarantee, it sets a path forward in the next few months to secure a return to operations for many years to come.”
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The release did not specify which other companies are buying or selling shares of the project.

Prior to the completion of the restructuring the plan, the Terra Nova ownership percentage stakes were as follows: Suncor (operator, 37.675), ExxonMobil (19), Equinor (15), Cenovus (13), Murphy (10.475), Mosbacher (3.85) and Chevron (1).

The provincial government had insisted it was not interested in taking an equity stake in the project, which has not seen any oil production since late 2019; the floating production and storage (FPSO) vessel associated with Terra Nova is currently tied up at Bull Arm in Trinity Bay.
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However, a joint news release from Premier Andrew Furey and Andrew Parsons, Minister of Industry, Energy and Technology, reiterated the financial incentives the province has made with regards to the project.
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“Our government is pleased with the announcement this evening,” said the release, which suggested the interim equity solution could help secure the project for the next decade.

“To support the long-term viability and benefits attached to the Terra Nova project, we committed over $500 million in financial assistance over the remaining life of the project through the direct contribution of $205 million from the Newfoundland and Labrador Oil and Gas Industry Recovery Assistance Fund, an increase of $30 million from the original MOU (memorandum of understanding) terms, as well as changes to the royalty structure valued at over $300 million.
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“We are pleased that this financial support has assisted project owners in reaching this interim agreement.”

Furey and Parsons will be available to the media Thursday morning on the announcement.

Charlene Johnson, the CEO of the Newfoundland and Labrador Oil and Gas Industries Association (Noia), which represents over 400 companies supplying servicing the Newfoundland offshore, said there will be “immense relief” as a result of Suncor’s announcement.
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“The Terra Nova project has provided thousands of jobs, billions of dollars in royalties and revenue, and helped our supply and service sector grow its expertise in operating in a harsh weather environment, Johnson said in a release Wednesday night. “For Noia members involved in the supply and service sector and the thousands of people who rely on this project for their livelihood, this is extremely good news accompanied by immense relief.”
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Johnson commended Furey, Parsons, Suncor and the other project partners “for staying at the negotiating table and remaining committed to this project” and Dave Mercer of Unifor Local 2121 “for his tireless efforts on behalf of his members, this project, and our industry.”

Johnson encouraged all parties to work towards finalizing the agreement.

“The Terra Nova field has produced approximately 425 million barrels of oil and we know the asset life extension project is expected to capture another 80 million,” she said. “Noia members look forward to being a part of the process to recover those additional barrels of oil and this project continuing to bring well-paying jobs and economic stimulus to Newfoundland and Labrador.

“We look forward to seeing the Terra Nova FPSO refitted and back where it rightfully belongs, offshore.”

Source: Saltwire| This text was excerpted from the media outlet cited on June 17, 2021 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.