Failure to revive a mothballed production project prompted Calgary-based Suncor Energy Inc. to announce Tuesday a C$425 million ($319 million) write down on its 27.5% share of an oilfield offshore of Newfoundland.
Suncor said majority owner Husky Energy Inc. stranded a 200 million bbl White Rose field addition by suspending construction when the Covid-19 virus pandemic gutted global oil markets 10 months ago.
The Jan. 1 closure of Cenovus Energy Inc.’s takeover of Husky “has cast significant doubt on the future of the West White Rose project,” Suncor said. The company added that the federal and local governments have agreed to provide “some support” for the West White Rose project in 2021.
Cenovus, meanwhile, said more review would be done of the West White Rose project, which at a cost of C$2.2 billion ($1.6 billion) aims to raise the Atlantic oilfield’s production into the 100,000 b/d range from 26,000 b/d and add 14 years to its lifespan.
Suncor’s doubt about the project did not surprise investors. A Cenovus shareholder presentation on the Husky takeover rated the stalled Newfoundland expansion as an option in the same long-range future league as prospects in China and Indonesia.
The presentation promised annual cuts of C$1.2 billion ($900 million) off combined Cenovus/Husky spending, with management dedicated to “focusing capital on the highest-return assets and opportunities.”
The White Rose ocean platform, 350 kilometers (160 miles) out in the Atlantic east of St. John’s, is not the only Newfoundland casualty of the Covid-19 pandemic and resulting depression of oil demand, prices and supply development. Oil flows and a lifespan extension project also have been suspended at the nearby Terra Nova field, where Suncor has a 37.5% ownership stake and operates the production platform as senior partner in a seven-company consortium.
Newfoundland’s lone oil refinery, the 130,000 b/d Come By Chance, is mothballed while New York owner Silver Range Capital Partners looks for buyers. Meanwhile, the Newfoundland and Labrador Oil and Gas Industries Association shrank by 60 member companies in 2020.
The current state-of-the-industry review by the Canada Energy Regulator (CER), titled Canada’s Energy Future 2020, anticipated continuing erosion of the nation’s high-cost North Atlantic oil supplies. Since peaking at 368,000 b/d in 2007, Newfoundland production sank by 32% to 251,000 b/d in 2020, according to the CER.
In a CER business-as-usual scenario, Newfoundland output would decline to 177,000 b/d in 2030, 128,000 b/d in 2040 and 23,000 b/d in 2050. In a CER scenario titled “evolving,” which considers possible environmental policy and technology changes, Newfoundland oil would sink faster to 123,000 b/d in 2030, to 49,000 b/d in 2040 and all but vanish to 2,530 b/d in 2050.
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