How a pandemic and production war thrashed one of N.L.’s 4 producing oil fields – CBC.ca

Posted: May 21, 2020 at 4:46 pm

Instead of producing oil offshore Newfoundland, the Terra Nova FPSO may soon become a longer-term fixture in Conception Bay, or dockside at a port like Bay Bulls.

That's not a good scenario for Newfoundland and Labrador's oil industry, the hundreds of workers linked to the aging oil production vessel, or a provincial treasury that can ill afford to lose the couple-hundred-million in oil royalties that typically flow from the Terra Nova each year.

The Terra Nova oil field was the second of four in the offshore to begin production, with first-oil from the Terra Nova FPSOreported in January 2002.

Since then, Suncor Energy and its partners have pumped more than 420 million barrels of oil from the field, nearly twice as much as the White Rose field, though well short of the more than 1.1 billion barrels at Hibernia.

Terra Nova averaged nearly 30,000 barrels of production each day in 2018 and 2019.

The oil companies long ago recovered their initial investment in the project, and as a result, oil royalties from the Terra Nova are the most lucrative for the province on a per capita basis.

But the vessel is near the end of its life, and it has been anything but smooth sailing for the past six months.

Now a deluge of ill winds have combined to cripple the operation, and derail a costly plan to overhaul the vessel to add adecade to its life and produce up to 80 million more barrels of oil.

There's a very real possibility that, once it leaves this summer, the Terra Nova FPSO might not return to the Grand Banks for up to two years. That's left workers on edge, with their futures very much in limbo.

So how did we get here?

The Terra Nova is showing its age. That's one factor. A global pandemic has also dealt a devastating blow to the world oil industry, with nearly every form of transportation practically seized up. And a production war between Saudi Arabia and Russia earlier this year drove stockpiles to the brim.

Newfoundland and Labrador is not exempt from these world events despite the coveted light, sweet crude that is produced in our offshore and the industry is now in crisis mode.

The challenges for the Terra Nova began in December, when theboard that regulates the offshore industry ordered a stop to production because of a safety deficiency related to fire suppression. Further inspections found more problems.

Suncor and the Canada-Newfoundland and Labrador Offshore Petroleum Boardhave been in talks for months, trying to reach an agreement that would allow the vessel to resume production.

Those talks recently broke down, with the partners unwilling to invest the estimated $150 million to $200 million required to get approval to operate from the board, according to sources.

And a six-month, $600-million plan to sail the Terra Nova to a dockyard in Spain last month for life-extension overhaul is in limbo because of the COVID-19 pandemic.

It's work that cannot be done in this province or Canada, for that matter sayinsiders, and missing the window of opportunity in Spain is a setback.

"We do not have an approved alternative for the asset life extension project," confirmed Suncor in a statement Friday.

What's more, the vessel's all-important certificate of fitness expires next summer, and certifying authorities likeLloyd's Register North Americawill demand a major refit before the Terra Nova resumes production.

So while plenty is still unknown, this is certain: the Terra Nova will soon be disconnected from its subsea production systemsand will sail into an uncertain future.

That's a blow for the province, on many levels.

According to a benefits report released by Suncor for the fourth quarter of 2019, atotal of 853 people were working with the Terra Nova project at the end of last year, and more than 90 per cent of them were residents of Newfoundland and Labrador.

What will become of those workers?

"Our people are very important to us.When a final decision is made on the path forward, we will work to understand the staffing requirements to support the plan and keep our team informed as decisions are made," Suncor stated in an email Friday.

The removal of the Terra Nova will also be felt by the supply and service sector,from helicopter and supply ship services to catering and personal protective equipment sales.

For the fourth quarter of 2019, there were more than 1,500 purchase orders related to the project, valued at $24 million. Nearly $16 million of those purchases were made from companies with locations in Newfoundland and Labrador.

It's little wonder the N.L. oil and gas industries association and its 600 members arein panic mode. Many of Noia's members have slashed jobs, and some have closed up shop, according to CEO Charlene Johnson.

But the union says it will continue to press for a solution, including a quicker return to production.

"We're trying to get this reversed. There is still some fight left in us yet," said Dave Mercer, president of Unifor Local 2121, which represents 400 workers involved with the Terra Nova.

Read more from CBC Newfoundland and Labrador

Original post:
How a pandemic and production war thrashed one of N.L.'s 4 producing oil fields - CBC.ca

Related Posts

Comments are closed.

Archives