$12-billion mega Bay du Nord oil project put on the back burner for three years

Norwegian state-owned energy giant Equinor has put on hold for three years the development of its controversial Bay du Nord oil project off the coast of Newfoundland and Labrador, which the country’s government expects to be among the world’s lowest carbon projects per barrel of oil.

Following delays, Equinor received approval from the Canadian government to develop the Bay du Nord project in April 2022, after the government found itself between a rock and a hard place due to energy security concerns. However, Equinor has decided to suspend the Bay du Nord project for three years due to – what it describes as – “challenging market conditions.” The rise in costs, which came as a consequence of the Ukraine and energy crises, is cited as the reason for yet another delay in the development of Canada’s new deepwater oil project.

Trond Bokn, Equinor’s senior vice-president of project development, remarked: “Bay du Nord is an important project for Equinor. Within the context of the changing market with increased cost, we will now look at the project again to see if we can do further optimisations to our concept and strategies.”

This is not the first time the $12-billion project was put on a shelf due to rising costs, as the previous hiatus set back the original timeline for the final investment decision (FID) and first oil, which were expected in 2021 and 2025, respectively. With Equinor hitting the breaks on this oil project, the revised timeline, which anticipated FID in the next couple of years and the first oil as early as late 2028, is not likely to come to pass.  

Regarding the setback to the development of Bay du Nord, Charlene Johnson, Energy NL CEO, said: “We have seen much market volatility in recent years, in our industry, and wider economy. As we all know, this project has seen numerous delays in the past number of years, and this is just another bump in the road to what we still feel will be a successful project. We have seen this before, and come through the other side. We will do so again.

“Our members will continue to prepare and show, as a sector, that we are ready to play a leading role in one of the world’s lowest carbon energy projects. Energy NL will remain in contact with Equinor in the coming weeks. As you have seen this week, there are so many reasons for optimism in our industry – from our current offshore projects to exploration programmes and renewable energy developments – and despite this news, we will continue to remain optimistic, both for our industry and for the Bay du Nord project.”

In response to the postponement, Andrew Furey, Newfoundland & Labrador Premier, stated: “We are certainly disappointed to learn that Equinor has decided to delay the Bay du Nord project by up to three years due to challenging market conditions and increased costs.

“We recognise the company believes strongly in the project and is continuing its commitment to Newfoundland and Labrador as it is maintaining its office presence and employees. Our government looks forward to continuing our strong relationship with Equinor and other stakeholders as we ensure this project maximises benefits for Newfoundlanders and Labradorians.”

The development of this project is facing opposition from environmentalists. To handle this, Equinor spent two days in court at the start of March 2023, tackling the scrutiny over the development of the Bay du Nord oil project, as Ecojustice set out to overturn the government’s approval for the project.

While Furey and the Canadian government value their relationship with Equinor and “shared belief in the strength of the Bay du Nord project with its lower carbon oil to meet global demand,” environmental groups are celebrating Equinor’s decision as a climate victory.

In line with this, Sierra Club Canada sees the postponement of the Bay du Nord giant offshore oil and gas project as a testament to the power of its “collective voice,” adding that it “won’t rest until this project is permanently shelved.” Additionally, it points out that such projects do not have “a real economic future in a world that meets our climate targets and moves away from oil and gas.”

Commenting on Equinor’s decision to shelve the project, Ian Miron, lawyer at Ecojustice, asked: “By ‘challenging market conditions,’ do they mean the phalanx of environmental groups — led by Ecojustice lawyers — who took the federal government to court over its approval of the project?

“But despite this breather, our fight continues. We want nothing less than a proper assessment of Bay du Nord’s potential for harm, and this delay provides the perfect opportunity.”

Ecojustice claims that it maintained three points throughout its legal challenge for the Bay du Nord project, emphasising that federal approval failed to consider carbon pollution from burning the oil and gas extracted, known as downstream emissions; Indigenous communities were not adequately consulted; and that risks to marine wildlife — including endangered species — were “blatantly ignored.”

“Bay du Nord is projected to produce between 300 million to one billion barrels of oil over its lifetime. The longer we can hold it off, the more chance we have of our leaders catching up to science and — in the face of ongoing climate catastrophes — cancelling Bay du Nord altogether,” added Miron.

The Bay du Nord project consists of several oil discoveries in the Flemish Pass basin, some 500 km northeast of St. John’s in Newfoundland and Labrador, Canada. The first discovery was made by Equinor in 2013, followed by additional discoveries in 2014, 2016, and 2020 while the confirmed discoveries in 2020 in adjacent exploration license EL1156 – Cappahayden and Cambriol – are potential tie-ins in a joint project development.

Equinor’s plans for the development of the Bay du Nord project entail an FPSO vessel, suitable for the tie-back of adjacent discoveries and future prospects. In line with this, Salt Ship Design disclosed in September 2022 that it had designed a hull for a harsh environment FPSO, which would serve on the Bay du Nord project.

In addition, Equinor, which was also working on early-phase concept studies for the project, awarded in April 2023 a letter of intent (LOI) to KBR’s Canadian entity – KBR Industrial Canada – for the front-end engineering design (FEED) of the topside facilities of the Bay Du Nord FPSO.

Another project, which Equinor is working to develop West of Shetland is facing opposition from environmentalists. This project is called Rosebank and the FID is slated for 3Q 2023.

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