Construction on Canadian oil project set to restart following suspension of over two years
Following a pause of over two years, Canada’s Cenovus Energy and its partners have agreed to restart the West White Rose Project offshore Newfoundland and Labrador with the first oil from the platform anticipated in the first half of 2026.
The construction of the project was suspended in March 2020 following the Covid-19 pandemic to prevent the transmission of the virus. At the time, the project was operated by Husky Energy, which merged with Cenovus Energy in January 2021.
Cenovus said on Tuesday that the project is expected to reach peak production of approximately 80,000 barrels per day (bbls/d), 45,000 bbls/d net to Cenovus, by year-end 2029.
The West White Rose Project will add an expected 14 years of production to the White Rose field located about 350 kilometres east of St. John’s. The project is about 65 per cent complete and the remaining construction includes the completion of the concrete gravity structure and topsides, which will serve as the drilling platform. Once installed, the platform will be tied into the existing infrastructure. A scheduled 70-day drydock program for the SeaRose FPSO will proceed in 2024.
The restart decision builds on Cenovus’s September 2021 restructuring of its working interests in the White Rose and Terra Nova fields, improving the strategic alignment across the two assets.
Cenovus and Suncor, as part of the restructuring, have entered into an agreement whereby Cenovus will decrease its working interest in the White Rose field and satellite extensions while Suncor will take a larger stake, with the approval of the West White Rose project restarting. Cenovus has reduced 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. Nalcor has a 5 per cent working interest in the satellite fields.
“The joint venture owners have worked together to significantly de-risk this project over the past 16 months. As a result, we’re confident restarting West White Rose provides superior value for our shareholders compared with the option of abandonment and decommissioning,” said Alex Pourbaix, Cenovus President & Chief Executive Officer.
“With the project about 65 per cent complete, combined with the work done over the past 16 months to firm up cost estimates and rework the project plan, we are confident in our decision to restart this project in 2023.”
Amended royalty structure & project costs
According to Cenovus, an amended royalty structure with the Government of Newfoundland and Labrador, which provides safeguards to the project’s economics in periods of low commodity prices, contributed to the decision to restart the project.
Andrew Furey, Premier of Newfoundland and Labrador, commented: “We have a responsibility to the oil and gas industry, to our province and our people to plan for the future. As we advance efforts to achieve net zero by 2050 and plan for a transition, we will foster an environment that supports our economy by embracing renewable energy while maximizing our low-carbon oil and gas advantage.”
Andrew Parsons, Minister of Industry, Energy and Technology, said: “Other parts of the world will continue to produce oil – and our oil and gas is a responsible choice.”
The remaining capital required to achieve the first oil is expected to be approximately $2 billion to $2.3 billion net to Cenovus. This includes construction costs of approximately $1.6 billion to $1.8 billion net to Cenovus for the completion of the West White Rose full platform, and about $400 million to $500 million net to Cenovus for subsea drilling and completions work and the SeaRose FPSO vessel’s asset life extension.
Capital to complete the project is largely offset by the deferral of planned decommissioning costs of $1.6 billion to $1.8 billion over the next five years that had been assumed in the business plan presented in December 2021. Included in the West White Rose Project capital estimate is $120 million net to Cenovus to be spent in 2022 as the company works towards the full restart of the West White Rose Project in 2023.
Cenovus is also a partner in another Canadian offshore oil development, the Equinor-operated Bay du Nord, which has recently been approved by the Canadian government much to the dismay of environmental organisations. However, as a response to the approval, the environmentalists have recently launched a lawsuit to overturn the federal government’s approval. If developed, the project would be in operation for 30 years.