A Newfoundland and Labrador oil industry that had been braced for bad news is instead breathing a sigh of relief following news Wednesday evening that there’s renewed hope for the future of the Terra Nova oilfield.
Suncor Energy says an agreement in principle had been reached to restructure the ownership of the oilfield, continue planning for a major refit of the assets and possibly sanction a plan to return to production in the fall.
Though “not a guarantee, [the agreement] sets a path forward in the next few months to secure a return to operations for many years to come,” Suncor CEO Mark Little said in a news release issued just after 8 p.m. NT.
After being part of a months-long campaign to save the oilfield, the union leader representing many of the workers on Terra Nova was ecstatic.
“We’re eager to work with Suncor. And we’re eager to go back to work, and do what the Terra Nova was meant to do, and that was make money. For employees pay taxes, and try and help get this economy back,” Dave Mercer, president of Unifor Local 2121, told CBC News in a phone interview.
Contingent on province’s promises
As part of the agreement, Little said a “subset” of the seven oil companies originally involved in Terra Nova will increase their ownership interests. Suncor will increase its equity stake from 38 to 48 per cent. However, a complete picture of the new ownership structure was not revealed.
CBC News has previously confirmed that four partners, including ExxonMobil, Equinor, Mosbacher and Chevron, had decided to exit the partnership.
Suncor said the agreement is subject to finalized terms and approval from all remaining partners.
Little also said the deal is contingent on a half-billion dollars in cash and royalty relief promised by the provincial government.
Minster of Energy Andrew Parsons confirmed the province will live up to its commitment of $205 million from the oil industry recovery fund, and some $300 million in royalty relief that would have been paid to the provincial government.
“We are thrilled; very happy that the partnership was able to come together to make this work,” Parsons said Wednesday evening.
“To get this news today, it’s really a great boost to our province, to our industry, and to all those women and men; they’ve had a lot of tough months.”
The oil companies had asked the provincial government to take an equity stake in the project, but the governing Liberals rejected the idea, saying it was too risky for a province already facing a financial crisis.
Parsons said Wednesday’s agreement validates the province’s position.
“I think it showed that the positioning we took was right. That the offer we made was good, and that it was the right deal,” he said.
The aging Terra Nova FPSO, the floating production, storage and offloading vessel, has not produced oil since late 2019, and most of the more than 1,000 jobs linked to the oilfield have been lost.
In late May, Little said the likely outcome for the oilfield was decommissioning and abandonment if the seven companies did not reach a unanimous decision on a path forward.
Little set June 15 as the deadline for an agreement, and tensions increased as the deadline passed on Tuesday without any word from the company.
The province’s oil and gas industries association, known as Noia, welcomed the news.
“This announcement is long-awaited, positive news for our offshore oil and gas industry, and indeed our province,” said Noia chief executive Charlene Johnson.
Terra Nova “has provided thousands of jobs, billions of dollars in royalties and revenue, and helped our supply and service sector grow its expertise in operating in a harsh weather environment,” Johnson said.
“This is extremely good news accompanied by immense relief.”
In a statement Wednesday night, Premier Andrew Furey said: “Our government is, and continues to be, supportive of the province’s oil and gas industry and we are pleased on behalf of workers and their families that project owners have reached this interim equity solution and continue to work to secure this project for the next 10 years.”