Cenovus Energy and its partners are moving ahead with the West White Rose oil project, a $3.2-billion expansion of the White Rose oilfield in offshore Newfoundland, and the deal includes changes to how much royalty money the companies will have to pay to the provincial government.
In separate press releases issued Tuesday morning, both Cenovus and Suncor — another partner in the project — said the finalized agreement with the province includes an amended royalty structure that “safeguards to the project’s economics in periods of low commodity prices.”
Speaking at the Energy N.L. conference Tuesday morning, Premier Andrew Furey said the changes mean the province will get more royalty money when oil prices are high.
“In a high-price environment, we could be up to 42.5 per cent extra royalties on this project,” he said.
Furey said the government expects the project will lead to about 250 permanent platform jobs, and 1,500 other jobs related to employment ramping up at the construction site in Argentia immediately.
The West White Rose project was suspended in March 2020, as the COVID-19 pandemic took hold, sending oil markets plummeting as travel and other economic sectors ground to a halt.
Work on the fixed wellhead platform — which will be tied back to the SeaRose floating production, storage and offloading vessel, known as an FPSO — shut down at sites in Marystown and Placentia leaving hundreds without work.
Both the federal and provincial governments rejected the idea of buying an equity stake in the project.
In December 2020, the Newfoundland and Labrador government gave $41.5 million from the federal Oil and Gas Industry Recovery Fund to Husky Energy to keep 331 jobs at the idled project going in the interim.
But the project still faced an uncertain future until Tuesday’s announcement.
“The joint venture owners have worked together to significantly de-risk this project over the past 16 months. As a result, we’re confident restarting West White Rose provides superior value for our shareholders compared with the option of abandonment and decommissioning,” said the company’s president and CEO, Alex Pourbaix, in the statement.
Cenovus, which acquired its ownership stake in the project after buying Husky Energy in late 2020, said it’s now decreasing its working interest in both the White Rose field and the extension — down to 60 per cent in the original field, and 56 per cent in West White Rose.
Suncor said it will increase its stake in the oil field to 40 per cent and in the extension to 38 per cent in the extension in exchange for a $50-million payment from Cenovus,
Newfoundland and Labrador Crown energy corporaton Nalcor Energy owns five per cent of the project, having invested $110 million.
The provincial government gave the project environmental approval in 2013, and the company officially sanctioned it in 2017.
At the time, Husky said the expansion project would result in between $3 billion and $4 billion in economic benefits for the province in the form of royalties, taxes and equity payments.
The expansion is a massive concrete gravity structure that will rise to a height of 145 metres from base to top once complete. Cenovus said it expects first oil from the platform to come in the first half of 2026, with production peaking at around 80,000 barrels a day by the end of 2029.
The project is expected to extend the life of the oil field by 14 years and give Cenovus access to an extra 200 million barrels of oil.
Furey promoting N.L. oil
In Tuesday’s release, the province said that in addition to changes in the royalty structure it will receive a $200-million decommissioning credit, and $100 million to set up a green transition fund.
The costs of decommissioning offshore oil projects — and how much of it comes from taxpayers — aren’t made public.
When asked about transitioning away from oil, Furey repeated the government’s stance that oil in offshore Newfoundland takes less carbon to extract than it does in other parts of the country.
“So when companies and individuals are faced with picking petroleum products — that are going to be required for the next 20, 30 years — I think it’s incumbent, it’s responsible, it’s ethical for us to be picking the lower carbon-emitting products,” he said.
References to low-carbon oil refer only to the emissions created during extraction. As with all oil, the majority of emissions occur during refining and combustion.
View original article here Source