Canadian operators approve reactivation terms for two offshore projects

Sept. 9, 2021
Suncor Energy and Cenovus have agreed to re-start two major development projects offshore Newfoundland and Labrador.

Offshore staff

CALGARY, Alberta – Suncor Energy and Cenovus have agreed to re-start two major development projects offshore Newfoundland and Labrador.

Along with Murphy Oil, as co-owners of the suspended Terra Nova FPSO, which has been demobilized to the shore, they have finalized an arrangement to restructure ownership and move forward with the Asset Life Extension Project.

Suncor will now have a 48% (previously 38%) controlling stake; Cenovus 34% (previously 13%); and Murphy Oil 18% (formerly 10%). Exiting participants Equinor, ExxonMobil, Chevron, and Mosbacher Operating will pay Cenovus a total of $78 million as a contribution toward future Terra Nova decommissioning obligations.

The agreement also includes royalty and financial support from the government of Newfoundland and Labrador with up to $205 million allocated, on a matching contribution basis, to support related local onshore and offshore work.

The project should extend Terra Nova’s productive life by around 10 years to 2033, delivering an additional 70 MMbbl of resources and peaking at around 29,000 b/d in 2023. The FPSO will soon undergo maintenance work at the Bull Arm fabrication site in Newfoundland before sailing across the Atlantic to dry dock in Ferrol, Spain, later this year.

It should return to resume operations before the end of 2022.

Mark Little, Suncor president and CEO, said the agreement also provides certainty for the project’s supporting 1,000-plus local direct and indirect jobs.

Suncor/Cenovus also entered a conditional agreement, subject to a re-start decision on the West White Rose project, which was suspended last year following the oil price crash.

Cenovus, as operator, will complete its project re-start evaluation by mid-2022. If the economics appear sound enough to justify a resumption at that point, Suncor will raise its interest in the White Rose offshore field from 27.5% to roughly 40%, in exchange for a cash payment by Cenovus.

Suncor would then assume capital commitments on the 12.5% additional stake on a go-forward basis only. No significant capex spending is anticipated prior to 2023 and both companies will work on efficiency improvements.

Cenovus would reduce its stake in the field from 72.5% to 60%, and in the White Rose satellite extensions from 68.987% to 56.375%. Nalcor is the project’s other shareholder.

The White Rose asset joint venture owners are Cenovus (operator) and Suncor. The West White Rose Project joint venture owners are Cenovus (operator), Suncor, and Nalcor.