Suncor Energy ( SU Quick Quote SU - Free Report) and partners finalized the previously-announced agreement to restructure the ownership of the Terra Nova offshore oil project off Canada's east coast.
Since late 2019, the production from the Terra Nova floating, production, storage and offloading (“FPSO”) facility has been offline as the authority for the province ordered the shutdown of operations due to the company's violation of obligations regarding the excess fire water pumps on the FPSO. However, Suncor and Terra Nova co-owners agreed to shuffle their shares to save the troubled project and extend its life.
Cenovus Energy ( CVE Quick Quote CVE - Free Report) and Murphy Oil Corporation ( MUR Quick Quote MUR - Free Report) will now fully control the Terra Nova project, with increased ownership positions. Suncor, the operator of the field, will increase its interest to 48% from about 38%. Cenovus will increase its ownership stake from 13% to 34%, while Murphy Oil will boost its interest from 10% to 18%.
Beside this, the project owners sanctioned the Terra Nova asset life extension project, which is aimed at extending the production life and capture nearly 80 million barrels of oil. Production from the Terra Nova oilfield is expected to recommence by 2022, with gross production expected to reach 29,000 barrels per day in 2023. Suncor will receive C$205 million from the government of Newfoundland and Labrador as a contribution to support the local onshore and offshore work related to the project.
In a separate transaction, Suncor entered an agreement to increase its ownership interest in the White Rose oilfield asset, which is owned by Suncor and Cenovus. As part of the agreement, Cenovus will take a decision on restarting the West White Rose development by mid-2022, which it operates offshore Newfoundland and Labrador.
The West White Rose project was intended to obtain 200 million barrels of light crude oil and extend the life of the White Rose oil field by 14 years. Upon the approval to restart the project, Suncor will increase its interest in the White Rose offshore field from 27.5% to 40%. The company will receive a cash payment from Cenovus in exchange for increasing its stake in the project, with Cenovus lowering its interest from 72.5% to 60%. No significant capital spending is expected before 2023 and the companies will improve the efficiency of the asset.
Atlantic Canada’s offshore oil and natural gas industry faced major challenges due to the sharp fall in commodity prices and was likely to face the slowest economic recovery from the pandemic. With the two major construction projects in the industry, the province is expected to get back to pre-crisis levels of economic activity and sets a path forward to secure a return to service in the years to come.
Headquartered in Calgary, AB, Suncor is a premier integrated energy company.
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