The Newfoundland and Labrador government insists it’s getting a good deal after throwing fossil companies a C$505-million lifeline to help keep the Terra Nova offshore oilfield alive, even if it means it will reap just $35 million in royalties over the next decade.
Following last Wednesday night’s down-to-the-wire announcement that the Terra Nova field would not be abandoned by its owners, Energy Minister Andrew Parsons said the real benefits to the province will come through jobs and taxes, The Canadian Press reports. Besides, he said, if the oilfield had shut down, there would have been no royalties at all.
“I think it’s a really good move for this province,” he told reporters Thursday morning. “We’ve minimized risk, we’ve protected the future, we’ve saved jobs.’”
The Terra Nova field sits about 350 kilometres southeast of St. John’s and hasn’t pumped oil since 2019. About 80 million barrels are still out there, but the field’s infrastructure needs extensive retrofitting work to get the last of it.
The work was supposed to begin last spring and keep the field pumping for another decade, but then the COVID-19 pandemic hit. By the end of 2020, when the work was supposed to be finished, the field’s massive floating production and storage vessel was bobbing in the water near St. John’s, dormant and nearly deserted.
Calgary-based Suncor Energy, Terra Nova’s minority owner, was expected to make a call on Tuesday about the future of the field, with CEO and president Mark Little having previously said abandonment was a “real possibility.”
Tuesday came and went without a word, and the company announced Wednesday night that instead of shutting the field down, the field’s seven partners would reorganize their shares. Suncor will take on a 48% stake in the project, up from 38%, and Norwegian fossil Equinor confirmed Thursday it will bow out completely. No other information about the ownership changes was available as of late last week.
Suncor said the newly-rearranged partners will provide “short-term funding” for the project until the fall, when owners will make another decision about whether to proceed with the life extension work.
The details still need to be finalized and approved, Suncor said, and the arrangement is contingent on the provincial government making good on its offer of $205 million in cash—which will come from a $320-million subsidy fund offered by Ottawa last fall to bolster the province’s sputtering oil sector—and a royalty adjustment valued at about $300 million.
The province’s offer is contingent on the oilfield’s partners moving ahead with the life extension work to keep the field pumping for the next decade, Parsons confirmed Thursday. If it all pans out, the new royalty deal will pay Newfoundland and Labrador $35 million over the extended 10-year lifespan of the project, the government said.
Premier Andrew Furey defended that amount Thursday, saying Terra Nova has been “quite lucrative” for the province, royalty-wise, since it first started pumping in 2002. “It’s not uncommon in oil projects towards the end of their life, to have a look at the royalty regime,” he told media.
Both Parsons and Furey emphasized that the $205 million in cash is coming from a federal fund specifically aimed at the offshore oil sector. “I can’t spend it anywhere else, it has to be spent in oil and gas,” Furey said.
He noted there was “massive” pressure on the government to buy an equity stake in the project, and said he was proud of Parsons for refusing, and for standing his ground throughout the tough negotiations.
Suncor is also a partner in the stalled West White Rose project, which is aimed at extending the life of the White Rose oilfield, about 50 kilometres east of Terra Nova.
The government gave majority owner Husky Energy, since bought out by Cenovus Energy, $41.5 million in December, also from the federal funding. When asked if he felt the much larger amount given to the Terra Nova operators would prompt Cenovus to ask for money, Parsons was resolute.
“Absolutely not,” he said. “I think we’ve sent the message here that we will take a position, we will be firm, we will be fair. But when we draw the line, the line is there.”
