N.L.'s oil industry buoyant as cost-conscious Equinor seeks to retool stalled project
Oil sector once again hopeful that roller coaster offshore oil project will become a reality
The oil supply and service sector in Newfoundland and Labrador is once again expressing optimism about the stalled deepsea Bay du Nord project after Norwegian oil giant Equinor sent strong signals it's committed to exhausting every option to revive it.
In early January, Equinor went to the market in search of contractors that can play a major role in Bay du Nord as the company tries to rein in soaring development costs.
One of the expressions of interests, also known as an EOI, is for companies interested in designing, building, installing and operating a floating oil production and storage vessel, better known as an FPSO. Previously, Equinor planned to build and operate its own FPSO.
Equinor will also spend several hundred million dollars this year on exploration as the semi-submersible rig Hercules makes its way to Newfoundland waters in the coming weeks.
The rig will drill an exploration well on a prospect called Sitka as the company attempts to learn more about the amount of recoverable oil available in the Flemish Pass, located about 500 kilometres northeast of St. John's. The contract also includes an option for an additional well.
Project manager relocates to St. John's
And in another sign that Bay du Nord remains high on the company's radar, the project's manager, Asbjørn Haugsgjerd, has relocated from Norway to Newfoundland and Labrador, and now lives full time in St. John's. Haugsgjerd was appointed to the project late last year.
"Our members are very pleased to hear that there is movement on the Bay du Nord project," said Energy N.L. CEO Charlene Johnson. "It's obvious to us that they absolutely want this project to succeed."
Energy NL.. is a lobby group that represents hundreds of companies in the province's energy industry, and those companies are poised to benefit greatly from the Bay du Nord project.
Johnson said she's "very positive" about the prospects for Bay du Nord, adding it has the potential to "really change the landscape in our province."
"It's projects like this that allow more money to go into social programs an infrastructure and it's projects like this that drum up more interest in our offshore to bring further exploration and further projects here. It's absolutely critical that this project proceed," she said.
Equinor shocked the energy sector eight months ago by announcing it was delaying a Bay du Nord sanction decision for up to three years because inflationary pressures meant the project was no longer viable. The decision came a little over a year after the federal government gave the environmental green light for Bay du Nord.
It was a major setback for an industry that viewed Bay du Nord, with up to one billion barrels of recoverable oil, as the next major chapter in the offshore because it would open a new basin and become the province's first deepwater field.
'We remain optimistic'
But the project is once again being viewed through an optimistic lens by supporters, while critics say the project is inconsistent with efforts to fight climate change.
Equinor's Tore Løseth told CBC News on Friday the company has previously retooled projects in order to lower costs and get them approved by the Equinor board.
"When it comes to the future of Bay du Nord, we remain optimistic," he said.
The new strategy for lowering development costs appears to be a greater reliance on third-party contractors, including the possibility of having another company design, build and operate the production vessel. Equinor has used similar operating models in Brazil and the United Kingdom.
Equinor is also seeking companies that can take on the massive Bay du Nord subsea requirements.
Energy Minister Andrew Parsons is cautiously optimistic about the latest Bay du Nord developments.
"They are taking a lot of positive steps In my mind when you think about the future of this," said Parsons.
As for concerns that the new approach might mean fewer spinoffs for the local economy, both Johnson and Parsons say they're not ready to ring any alarm bells.
"I've made sure to reiterate our points that the resource belongs to us and that we are going to want value in return," said Parsons.
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