Framework Agreement Reached For Deepwater Production Off Newfoundland
The premier of Newfoundland and Labrador announced today the first step into a new frontier for the province’s oil and gas industry — deepwater production.
Dwight Ball said a framework agreement has been reached with Equinor Canada and Husky Energy Inc. for the development of the Bay du Nord project.
Discovered in 2013, the Bay du Nord Project is expected to be sanctioned in 2020, with first oil expected in 2025.
The provincial government will take an equity stake of 10 per cent.
With reserves of nearly 300 million bbls of oil, Bay du Nord is the first remote, deepwater project in the province’s offshore (500 kilometres from shore and approximately 1,200 metres deep). It opens a new basin — the Flemish Pass — and is the first project to be negotiated under Newfoundland and Labrador’s generic oil royalty regulations.
“The future of offshore begins today,” Ball said. “To date, our offshore has been focused on one basin. Today, we mark a new era. It’s a new era of offshore with deepwater production and the opening of a new basin — the Flemish Pass. This will spark new opportunities in the offshore.”
The total capital and operating cost for the Bay du Nord project is expected to be $10.9 billion, Ball said. The life of the project is anticipated to extend from 12 to 20 years, he added.
“Husky and its partners have reached a framework agreement with the province in respect to Bay du Nord,” Rob Symonds, chief operating officer of Husky, said in today’s second quarter results conference call. “While more needs to be done before a decision to proceed is made, this represents a major milestone towards opening a new chapter on development in the Atlantic region.”
The project has many benefits for the people of Newfoundland and Labrador, including:
- More than $14 billion in economic activity (in 2017 dollars);
- In-province employment of 22.3 million person hours over the life of the project (approximately 11,000 person years);
- Estimated $3.5 billion in government revenues;
- Expected in-province fabrication of 5,000 metric tonnes;
- Focus on subsea engineering and new fabrication capabilities; and,
- A minimum $75 million in research and development, and education and training expenditures over 10 years to position Newfoundland and Labrador as a deepwater centre of excellence.
“This marks an important milestone to progress a successful development at the Bay du Nord discovery. This framework agreement provides important clarity and stability as Equinor and our partner Husky Energy work to move this project toward a sanction decision in the coming years,” said Unni Fjaer, vice-president, Offshore Newfoundland, Equinor Canada. “We also welcome our new equity partner, the province’s energy company, to the project.”
- Husky Energy Inc.