Terra Nova partners sanction life extension project

Canadian energy company Suncor and its partners in the Terra Nova FPSO and field located off Canada have finalized the agreement to restructure the project ownership and move forward with the Asset Life Extension Project.

Terra Nova partners reached an agreement in principle to restructure the project ownership and provide short-term funding towards continuing the development of the Asset Life Extension Project back in June 2021. The agreement was subject to finalized terms and approval from all parties.

Prior to completion of the restructuring, the Terra Nova co-owners were Suncor (operator, 37.675 per cent), ExxonMobil (19 per cent), Equinor (15 per cent), Cenovus (13 per cent), Murphy (10.475 per cent), Mosbacher (3.85 per cent), and Chevron (1 per cent).

Now, Suncor, Cenovus, and Murphy Oil control 100 per cent of the project with the increased ownership positions: Suncor – 48 per cent; Cenovus – 34 per cent; and Murphy Oil – 18 per cent.

Suncor said on Wednesday that the agreement also included the previously disclosed royalty and financial support from the Government of Newfoundland and Labrador including up to $205 million, on a matching contribution basis, to support local onshore and offshore work related to the Asset Life Extension Project.

In a separate statement on Wednesday, Cenovus said it would receive $78 million from the exiting partners as a contribution towards future Terra Nova asset retirement obligations.

The Asset Life Extension Project is expected to extend production life by approximately 10 years, providing an additional 70 million barrels of resource for the partnership.

The FPSO will undergo maintenance work at the Bull Arm Fabrication site starting early September prior to sailing to dry dock in Ferrol, Spain later this year with a safe return to operations anticipated before the end of 2022.

Mark Little, Suncor president and chief executive officer, said: “The decision to move forward with the Terra Nova project is a concrete example of Suncor’s commitment to invest in projects that have strong economic returns and will provide long-term value for investors. This agreement also provides certainty for the 1,000 plus local direct and indirect jobs that support the project”.

Furthermore, Cenovus and Suncor entered into a conditional agreement under which Suncor will increase its interest in the White Rose asset, subject to a restart decision on the West White Rose project, and Cenovus will reduce the company’s working interest in the White Rose field.

Alex Pourbaix, Cenovus President & Chief Executive Officer, said: “While we are still evaluating whether to proceed with West White Rose, the capital risk in our portfolio will be reduced if we decide to move forward”.

Under the agreement, Cenovus would reduce its stake in the original field to 60 per cent from 72.5 per cent and to 56.375 per cent from 68.875 per cent in the satellite extensions. Cenovus and its partners continue to evaluate their options on the West White Rose Project, with a decision to be made by mid-2022.

On the other hand, should the project economics be robust enough to lead to a restart decision, Suncor has agreed to increase its interest in the White Rose offshore field by 12.5 per cent (from 27.5 per cent to approximately 40 per cent) in exchange for a cash payment by Cenovus to Suncor. Suncor would assume capital commitments on the 12.5 per cent additional interest on a go-forward basis only.

Cenovus added it continues to progress swiftly towards its $10 billion net debt target, which it expects to achieve later this year.