Despite record profits, the Suncor exec says Terra Nova’s subsidies are “crucial” to the oil project’s survival
The Calgary oil giant, which is making staggering profits, is defending the decision to accept subsidies for the Terra Nova project off the coast of Newfoundland, saying government support in 2021 is critical to the project’s survival.
“We are very grateful for all the support from the provincial and federal governments,” Suncor’s Shelley Powell told CBC News on Friday.
“This was absolutely critical to ensuring we were able to secure a viable path for the Terra Nova. It has… created and sustained more than 1,000 local long-term jobs supporting the community and supporting this project in the support the future.”
Terra Nova is one of four mature offshore oil fields along with Hibernia, White Rose and Hebron.
The massive floating production, storage and offloading vessel used in the field, the Terra Nova FPSO, arrived at Conception Bay this week after a transatlantic crossing from a shipyard in Spain.
The ship has undergone a major overhaul, funded largely with more than $200 million in cash from a federally funded — and provincially administered — industrial recovery fund set up in late 2020 at the height of the global pandemic. The province also agreed to forfeit approximately $300 million in future royalties.
The deal was reached in June 2021 after weeks of uncertainty over whether the partners involved in Terra Nova would abandon the project, which has stopped producing oil since late 2019. It also came at a time when the oil industry was suffering from a meltdown in global markets, as the pandemic hit the travel industry and oil prices plummeted.
The government bailout was accompanied by an ownership reshuffle at Terra Nova, with four of the seven partners exiting and the remaining three — Suncor, Husky (since acquired by Cenovus) and Murphy Oil — expanding their holdings.
The 11-hour deal saved the Terra Nova, and it was towed to Spain more than a year ago for a so-called plant life extension that will allow for another 10 years of production, with an estimated 80 million barrels of oil remain field.
The ship is undergoing some final work at Conception Bay and is now subject to inspection by regulators to ensure it is safe to operate. Suncor has announced that production will resume between April and June.
“We are all very excited to see Terra Nova back home in Canadian waters,” said Powell, who acknowledged setbacks in the overhaul schedule and budget.
“As this work progresses, you find things that you may not have planned, and they just take time. We wanted to make sure we were doing all the necessary things so that when the ship goes back into the field and into production, we are confident in its ability to operate safely and reliably.”
Meanwhile, the economic landscape has changed dramatically since the government’s bailout of the Terra Nova was completed, and oil companies like Suncor are now reaping unprecedented gains on higher oil prices. For example, Suncor reported this week that it made $2.74 billion in the fourth quarter of 2022.
Newfoundland and Labrador Energy Minister Andrew Parsons told the Canadian press, “It’s enough to clench your fists.”
He added, “It’s frustrating when you hear about how a project could die and then they make multi-billion dollar profits. But that’s the nature of things. We have to find a way to do business with them.”
Suncor is the only oil company with ownership interests in all four offshore fields, and Shelley Powell said the company has a strong commitment to the province.
“It’s a key component of our exploration and production strategy,” she said.
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