June 29, 2022

Cenovus and Suncor dig to expand West White Rose production in Newfoundland

After a two-year hiatus during the Covid-19 pandemic and an ownership shuffle, a third project to revive Canadian oil production off Newfoundland has progressed.

Cenovus Energy Inc. and Suncor Energy Inc. said work would resume on their C$3.2 billion ($2.6 billion) supply development at West White Rose, which was halted in March 2020.

The move comes on top of growth on Canada’s east coast, which includes an extension of the Terra Nova platform joint venture and a Bay du Nord project led by Norwegian producer Equinor ASA.

The surge in activity prompted Newfoundland Premier Andrew Furey to say the province would obey national climate change policy – but keep oil production a mainstay of coastal livelihoods is and government revenue.

“As we continue our efforts to achieve zero ‘carbon emissions’ by 2050 and plan for a transition, we will foster an environment that supports our economy by embracing renewable energy while maximizing our low-emission oil and gas advantage. carbon,” Furey said.

Cenovus has estimated West White Rose production could begin in mid-2026 and reach 80,000 bpd of capacity by the end of 2029. The project replaces depleted wells and adds a pad to a field 16-year-old submarine 180 miles off St. John’s.

Nearby, Terra Nova is expected to resume production in 2023 at an initial rate of 29,000 bpd following a refit of its floating production, storage and offloading (FPSO) vessel. Operational issues brought 19-year-old Terra Nova to a standstill in December 2019. Oil prices plunged soon after by a repairs freeze caused by Covid-19.

Equinor has dispatched two offshore drilling rigs to the Bay du Nord property 300 miles off St. John’s, following approval in early April from Canada’s federal cabinet. The 200,000 bpd project is expected to start production in 2028.

The projects reverse the decline of Canadian offshore oil. Total production from four rigs on the Grand Banks of Newfoundland fell to 251,000 bpd in 2020, down 32% from the peak of 368,000 bpd in 2007, according to Regie data. of Energy of Canada (CER).

Along with government subsidies and royalty adjustments, an offshore industry ownership shake-up negotiated last fall is fueling the recovery by spreading investment risk.

Cenovus reduced its interest in the original White Rose field to 60% from 72.5% and to 56.38% from 68.87% in the planned new wells. Suncor took over the shares abandoned by Cenovus. A Newfoundland government company, Nalcor Energy, has a 5% interest in the new wells.

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At Terra Nova, Suncor’s ownership increased from 38% to 48%. The stake held by Cenovus, acquired when it took control of Husky Energy Inc., increased from 13% to 34%. Murphy Oil Corp. increased its stake to 18% from 10%.

At White Rose, “the joint venture owners have worked together to significantly de-risk this project over the past 16 months,” said Cenovus CEO Alex Pourbaix. “With the project approximately 65% ​​complete, combined with work done over the past 16 months to firm up cost estimates and rework the project plan, we are confident in our decision to restart this project in 2023.”

Cenovus also revealed in its announcement that funding for the West White Rose revival would be “largely offset by the deferral of anticipated decommissioning costs” of $1.3 billion to $1.4 billion over the next five years.