On June 16, the co-owners of the Terra Nova floating production, storage and offloading (FPSO) facility and associated Terra Nova offshore field reached an agreement in principle to restructure project ownership and provide short-term funding to continue development of the Asset Life Extension Project, with the intent to move to a final project sanction decision in the fall. The government of Newfoundland and Labrador provided royalty adjustments valued at approximately $300 million to support the project, and allocated $205 million in funding to the project, from the previously announced $320 million federal fund for the offshore oil and natural gas industry.
The agreement is subject to finalized terms and approval from all parties, and is contingent upon the provincial government’s financial support. The new ownership structure has yet to be announced though Suncor Energy, the project’s operator, announced it will increase its equity position in the project from 38 to 48 per cent.
The agreement is welcome news, as the project was at risk of being shut down – the FPSO has been offline since 2019 and requires significant upgrades to extend the life of the project. In 2019, the co-owners sanctioned plans to proceed with a project to extend the FPSO vessel’s life to approximately 2031 but the extension project was canceled due to COVID-19.
“Although this agreement 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,” comments Suncor president and CEO Mark Little. Suncor estimates about 80 million barrels of oil remain in the Terra Nova field.
If sanctioned, the asset extension project will preserve jobs, continue to provide revenues for government through royalties and taxes, and supply responsibly produced energy to the world.
“Newfoundland and Labrador’s offshore projects are producing some of the lowest emissions per barrel globally, and with energy demand increasing, the province has significant potential to grow its industry,” says Paul Barnes, director, Atlantic Canada and Offshore, Canadian Association of Petroleum Producers.
“However, the focus must be on improving competitiveness of Canada’s offshore industry if the province is to realize its full potential. It is critical that Newfoundland and Labrador and Canada move immediately to implement key recommendations outlined in the Oil and Gas Recovery Task Force report with a vision of improving industry competitiveness.” The report includes recommendations to governments, regulators and industry for concrete actions to drive the offshore industry’s recovery.