Nfld. & Labrador

Province dangles millions, offers royalty relief in attempt to save Terra Nova oilfield

The provincial Liberal government, on the eve of what many expect is an election call, has revealed a costly plan to get the Terra Nova FPSO back into production in the Newfoundland and Labrador offshore.

Liberals announce offer of $175M to Suncor and its partners in exchange for life extension for oil platform

The Terra Nova floating production, storage and offloading vessel is pictured here on Newfoundland's Grand Banks. It began producing oil in the Jeanne d'Arc Basin 18 years ago. (Canada-Newfoundland and Labrador Offshore Petroleum Board)

The provincial Liberal government, on the eve of what many expect is an election call, has revealed a costly plan, using public money as a bargaining chip, to get the Terra Nova FPSO back into production in the Newfoundland and Labrador offshore.

A news release was issued after 4 p.m. on Thursday, announcing that the Liberals were prepared to inject $175 million into the idled and aging floating production, storage and offloading vessel, and give Suncor Energy and its partners a break on future royalty payments to the provincial treasury.

Energy Minister Andrew Parsons defended the timing on Thursday evening.

"It's a case of us showing our willingness to be flexible for the best interest of the province and making this project go forward," he said during a telephone interview.

On the idea of giving up royalty payments at a time when the provincial government is facing a fiscal crisis, Parsons said, "This is money for the province, and if there's no project operational, we get nothing."

Parsons would not provide any specifics on a modified royalty agreement, saying those details are still being discussed.

The offer is part of a memorandum of understanding signed Thursday between the government and the oil companies that operate and own the Terra Nova.

Energy Minister Andrew Parsons defended the decision Thursday to offer a group of oil companies $175 million, and to renegotiate royalty payments, in an attempt to return the Terra Nova FPSO to the Newfoundland offshore, where it began producing oil in 2002. (Patrick Butler/Radio-Canada)

The offer is contingent on a commitment by Suncor and its partners to match the government contribution, and to commit to a long-term production plan for the Terra Nova, which has not produced oil since December 2019, and is now tied up at the Bull Arm fabrication site in Trinity Bay with its owners trying to determine its future.

One of the options floated by Suncor is decommissioning, which would result in hundreds of job losses and a severe hit to government revenues.

All sides have until March 31 to formalize an agreement.

In the news release, Parsons said the memorandum "reflects a commitment by the Terra Nova owners to continue discussions on establishing a viable path forward for the project."

The money would come from the $320-million offshore oil and gas industry recovery fund, which was created with federal cash in September.

Some $38 million has already been committed to investments in the Hibernia oil platform, while another $41.5 million is being spent to help save the stalled West White Rose extension project.

The fund was created to help an industry that has been battered by the global pandemic.

The Terra Nova was scheduled to undergo a life-extension refit at a shipyard in Spain last year, but those plans were shelved as oil markets collapsed.

Many workers associated with the Terra Nova have since been laid off.

"This agreement, and what we're willing to do, would be contingent on the asset life extension happening, and people getting back to work," said Parsons.

Suncor's vice-president for the Newfoundland offshore, Josée Tremblay, said in a statement, "We have greater certainty and clarity as we develop the path forward for Terra Nova and we are optimistic regarding the future of the project."

Suncor's partners in the Terra Nova are ExxonMobil Canada Properties, Equinor Canada, Cenovus Energy subsidiary Husky Energy, Murphy Oil Company, Mosbacher Operating and Chevron Canada Resources.

Parsons said getting all the partners signed on to the memorandum of understanding required months of discussions.

Read more from CBC Newfoundland and Labrador

ABOUT THE AUTHOR

Terry Roberts is a journalist with CBC's bureau in St. John's.

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