Terra Nova FPSO down but not out
Posted on September 17, 2021 | By Ashley Fitzpatrick | 0 Comments
Offline since late 2019, the Terra Nova floating production, storage and offloading vessel (FPSO) came “perilously close,” according to Noia CEO Charlene Johnson, to never returning to production. More than the loss of public revenue, it would have been an end to a project that launched more than a few careers for locals, who accepted the challenge of Newfoundland and Labrador’s then still-fledgling offshore oil and gas sector.
The agreement announced September 8, restructuring the vessel’s ownership and settling the financial basis for an extensive refit and life extension project, prompted a few sighs of relief even as it stirred difficult conversations about climate change and the need to transition away from oil production.
The FPSO will see maintenance work at the Oil and Gas Corporation of Newfoundland and Labrador’s Bull Arm Fabrication Site, before sailing to Ferrol, Spain, where it will enter drydock for more work. There will be repairs but also upgrades to the ship and select systems, expected to extend the FPSO’s production life by about 10 years. That decade is forecast to allow for another 70 million barrels of oil to be produced at the Terra Nova oil field. The FPSO may be back online about 350 kilometres off St. John’s as early as the end of 2022.
“This [agreement] means significant work for Noia members involved in the supply and service sector and significant employment for Newfoundlanders and Labradorians now, and into the future,” Johnson said.
More than a few individuals in the oil and gas sector internationally, who once upon a time worked in Newfoundland and Labrador, and people living in the province generally may recall the start of Terra Nova’s life. It began long before the start of FPSO operations in January 2002.
The oil field had been discovered in 1984 by Petro-Canada (now a subsidiary of Suncor Energy). The project—as has been typical for the offshore—spent more than a decade in a pre-development stage before moving forward, with key approvals from the CNLOPB in 1998. Then came construction.
The Terra Nova oil field covered about 128 square kilometres and was only the second offshore field to be developed in Newfoundland and Labrador. It is about 35 kilometres from the first, being Hibernia. Terra Nova has existed in the shadow of the earlier project to some degree. However, it made its own mark at launch in the use of an FPSO.
The Terra Nova Project owner names are often cited. At launch, the partners were Petro-Canada, ExxonMobil Canada, Husky Oil, Norsk Hydro Canada, Murphy Oil, Mosbacher Operating and Chevron Canada. There is less mention of the builders.
The Terra Nova FPSO build was led by Daewoo Industries in South Korea with major subcontractors including Scotland-based BARMAC. That said, two of the topsides modules, flare tower and deck assemblies came together at Bull Arm, where commissioning work also took place. The “Grand Banks Alliance” and later “Terra Nova Alliance” of businesses helped bring the vessel to life. Participating companies included SBR Offshore, Doris Conpro, PCL Industrial Constructors, Coflexip Stena, Halliburton Canada and FMC Canada.
The estimated total cost of the completed Terra Nova FPSO as it was sailed offshore in late 2001 was $2.7 billion. On its way, as Atlantic Business Magazine reported at the time, the vessel paused for a few hours off St. John’s. It was soon bumper-to-bumper on Signal Hill, as people made their way up the hill for a look at the ship as long as three football fields.
At the time of that sail-by, Terra Nova had already directly contributed $700 million (over a billion dollars today) to the Newfoundland and Labrador economy. Through 2000, an average of 1,930 people were employed each month building and commissioning the FPSO.
The “Faces of Terra Nova,” as captured in the magazine, included Cormorant Ltd. owner Jim Dempsey. Dempsey moved to the province in 1981 and was conducting oceanographic surveys for Petro-Canada around provincial waters including off Labrador, before setting off and forming Cormorant in 1994. Cormorant specializes in the operational side of marine environmental issues. The company started work on the Terra Nova project in 1996 and contracted beyond the FPSO’s commissioning, being involved in oil spill response planning, sorting vessel traffic, coordinating environmental studies and planning ice management. Cormorant continues today.
As the Terra Nova FPSO was being launched, Kim Keating was only a few years past receiving her Bachelor of Engineering from Memorial University in 1998. She already had work experience on the Hibernia project and had worked on the design for the Terra Nova FPSO with a team in the town of Leatherhead, England, before joining the commissioning team at Bull Arm. She worked out of Petro-Canada’s office in St. John’s as the FPSO sailed out and, at the time, was enrolled for MBA studies. She went on to complete her MBA and more recently furthered her education at the University of Toronto’s Rotman School of Management. Keating moved up the industry ranks in roles at Suncor and then the Cahill Group, where she would sign on as chief operating officer. Included in her community credits is a stint as president of the St. John’s Board of Trade in 2015.
They weren’t the only careers propelled forward by the oil development.
A lot can happen in 20 years. Then to now, the Terra Nova FPSO has produced more than 425 million barrels of oil, according to the Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB).
Suncor took over the project in 2009, after its acquisition of Petro-Canada. And per the new agreement to extend the FPSO’s life, the project continues to be led by Suncor, with a 48 per cent stake. Suncor remains the only company with an interest in all the active oil projects offshore Newfoundland and Labrador.
“The decision to move forward with the Terra Nova project is a concrete example of Suncor’s commitment to invest in projects that have strong economic returns and will provide long-term value for investors. This agreement also provides certainty for the 1,000 plus local direct and indirect jobs that support the project,” said Suncor president and CEO Mark Little, in a statement as the life extension was announced.
The other Terra Nova partners are Husky Energy (34 per cent) and Murphy Oil (18 per cent). The agreement on the life extension was also made with commitment from the Government of Newfoundland and Labrador to a royalty adjustment and direct financial support including up to $205 million, on a matching contribution basis, to support the work on the FPSO.
“We appreciate the deep collaboration and support from the provincial and federal governments, which has been crucial to helping us reach this important milestone,” Little said.
The same day as the announcement of new life for Terra Nova, Suncor also announced a new conditional agreement to increase its interest in the White Rose expansion, led by Cenovus. It is subject to a restart decision on the paused West White Rose Project. Cenovus committed to an evaluation by the middle of next year. If the results are favourable, Suncor has agreed to move up from a 27.5 per cent to about 40 per cent stake there. The West White Rose Project partners are Cenovus, Suncor and Nalcor.
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