The Canadian oil and gas industry recovery gained steam in Newfoundland Wednesday with a commitment to restart a mothballed Grand Banks production platform and the revival of an expansion for a second North Atlantic site.
Cenovus Energy Inc., Murphy Oil Corp. and Suncor Energy Inc. are planning an ownership overhaul to begin a 10-year asset life extension project for the dormant Terra Nova field. The field is around 250 kilometers (155 miles) offshore St. John’s.
The agreement also makes an ownership change in the neighboring White Rose field. The shuffle spreads partner risk to improve the outlook for rescuing a C$3.2 billion ($2.6 billion) addition called West White Rose that the Covid-19 pandemic interrupted.
The Terra Nova rebirth “provides a superior value proposition for our shareholders compared with the alternative of abandoning and decommissioning,” said Cenovus President Alex Pourbaix. “While we are still evaluating whether to proceed with West White Rose, the capital risk in our portfolio will be reduced if we decide to move forward.”
Suncor President Mark Little acknowledged “deep collaboration and support from the provincial and federal governments, which has been crucial to helping us reach this important milestone.”
The help, justified by the governments as job support for a province notoriously lacking in well paid employment, includes a grant of up to C$205 million ($164 million), plus a forecast C$300 million ($240 million) in future royalty reductions.
At Terra Nova, Suncor ownership increased by 10% to 48%. The share held by Cenovus, acquired with its takeover of Husky Energy Inc., jumped to 34% from 13%. Murphy raised its stake to 18% from 10%.
At White Rose, Cenovus cut its ownership of the original field to 60% from 72.5% and to 56.38% from 68.87% iin the planned new wells. Suncor picked up the shares dropped by Cenovus.
Asset prices paid for ownership rights that changed hands in the Canadian offshore oil overhaul were not disclosed. The deal eliminated the original minority partners in 19-year-old Terra Nova, which were Chevron Corp., Equinor ASA, ExxonMobil and Mosbacher Operating Ltd.
The restructured Terra Nova consortium predicted production would resume in 2023 at an initial rate of 29,000 b/dy, after maintenance in Newfoundland and a refit in Spain for the field’s floating production, storage and offloading vessel.
Operational problems shut down 19-year-old Terra Nova in December 2019. The oil price slump inflicted soon afterwards by the coronavirus stalled repairs. At its height a decade ago, the field flowed 100,000-110,000 b/d.
Depleting wells tapped by the 16-year-old White Rose platform were down to about 14,500 b/d this summer, 88% below the field’s youthful peak of 120,000 b/d.
The only other Canadian offshore oilfields, which are Hibernia and Hebron that are also on the Grand Banks, produced a combined total of about 270,400 b/d this summer, according to the Canada-Newfoundland Offshore Petroleum Board.
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