Faith in future of oil, gas

N.L. business community welcomes reboot of West White Rose project

At a small trade show booth displaying chains, metal hooks and other assorted industrial equipment, Darrell O’brien was all smiles.

After the two-year slog through COVID-19, the sales rep for the Equipment Corps company in St. John’s was enjoying the opportunity to pitch its supplies to the oil and gas industry at Energynl’s trade show and conference, the first face-to-face event since the pandemic began.

O’brien was feeling especially upbeat about the news Tuesday that Cenovus will restart the West White Rose project at Argentia.

“We were doing some business with them previously,” he said, “and we hope to resume some of those contracts.”

There’s relief at the Port of Argentia, as well. General manager Chris Newhook told Saltwire Network they were getting positive hints that something might happen soon, and it was nice to see the project confirmed.

He said that even though 60 per cent of the work is done, the final one-third of the concrete pour will require a lot of labour, and local operations will benefit.

Businesses in the community should also see some extra cash flow, he said, as workers travel through or rent in the area.

The port will also see an added benefit because of the West White Rose project. Once the platform is floated out, it will leave a “very interesting” site, said Newhook.

The partially constructed platform is currently sitting on dry ground. Once it is completed, the area will be flooded and an earth berm removed to allow the platform to be floated out.

“That will create a very deep harbour with an 18-metre draft, with a fully industrialized site around it.”

Newhook said that could position the port as an ideal location for other industrial work, anything from renewable energy projects to maintenance on submersible and semi-submersible drill rigs.

“So there’s many potential uses for that site, and we’re looking forward to the opportunity to market that in the future."

PROJECT RESUMES

In a news release, Cenovus president Alex Pourbaix said the company will spend about $120 million this year to resume the project and the construction at Argentia.

The following year will see a full restart of the West White Rose project, he SAID, with first oil expected in 2026. At peak production, by 2029, West White Rose will produce about 80,000 barrels per day.

At a scrum with reporters at the Energynl conference, Jonathan Brown, Cenovus vice-president, Atlantic, said, “We have worked on the project the past couple of years to sustain it, to make sure it’s ready for investment and to reduce risk.”

The company said one of the factors in its decision is an amended royalty structure with the province to provide “safeguards to the project’s economics in periods of low commodity prices.”

Brown said the royalty arrangement is based on a standard framework.

“We were able to build a solution that worked for both parties,” he said.

Cenovus is also contributing $100 million to the province’s green transition fund during the life of the White Rose project.

“That’s an important part of our industry responsibility. We are going to support the government’s efforts in energy transitioning,” Brown said.

West White Rose is expected to add another 14 years of oil production to the White Rose field.

Brown said the reboot may not necessarily mean a rebidding process for some of the subcontract work.

“We have a whole raft of existing contracts in place,” he said.

“But I would say, the majority of them, we need to underpin this, are the contracts we had in place before.”

Brown said the decision to resume the project was not prompted by this year’s spike in world oil prices.

“It’s not linked directly. We have to test out projects against mid and low world oil prices. Cenovus is conservative, and we needed to make sure we could manage risks at low world oil prices.”

The announcement was a mood booster in a room of 500 delegates with interest in oil and gas. It not only confirmed the decision to proceed with the development but created expectations of other things that may come, such as the Bay du Nord project under consideration by Equinor.

O’brien said he hopes this is the signal that the province’s energy sector could get back to pre-pandemic work, and supply and service companies can get busier as well.

“It’s been a tough couple of years, but we’ve survived,” he said.

It’s not just his own future O’brien is thinking of.

“I’ve got three girls,” he said, “and hopefully Newfoundland can provide something for them for the next 30 to 50 years.

“And I strongly believe that oil and gas is going to do it.”