Terra Nova, one of four oil fields on the Grand Banks of Newfoundland, is not being abandoned. At least, not yet. Suncor Energy, whose share of the project will increase from 38 per cent to 48 per cent, announced on Wednesday that “an agreement in principle to restructure the project ownership and provide short-term funding towards the continuing development” had been reached.
After 18 years of production, the Suncor Energy led consortium of energy companies were weighing whether to resume production after suspending operations in 2019, or abandon the project. Abandoning the project in a province where the oil and gas industry represents 20 per cent of provincial GDP would have been a serious economic blow.
At stake were approximately 1,000 direct jobs and $50 million to $125 million per year in tax and royalty revenue for the province, according to the Newfoundland and Labrador Oil and Gas Industries Association. The impact on the May 31 provincial budget, which the finance minister promoted as a plan to “return to fiscal balance within five years,” would have been immediate and significant.
The federal government has committed $205 million and the provincial government has agreed to waive $300 million in royalties over the expected additional ten years of production as an incentive to resume operations. In addition, the project owners had asked the N.L. government to take a 15 per cent equity position in the project and its refusal on Monday raised fears the project would be abandoned.
During an emergency debate on Monday N.L. Premier Andrew Furey told the House of Assembly, “we can’t afford to bet and lose.” In a province with a history of making ill-fated investments in private ventures Furey said he was, “not willing to roll the dice.”
Following the emergency debate, Suncor Energy asked the government to put its final offer in writing.
For months, rumours within the industry suggested that some of the seven partners in the project consortium wanted out. Equinor, the Nowegian energy giant, confirmed in an investor’s call on Tuesday that it would not participate in the extension of the Terra Nova project. Equinor holds a 15 per cent shareholder in the project, and its shares are expected to be part of the restructuring of the project’s ownership.
“Although this agreement in principle is not a guarantee, it sets a path forward in the next few months to secure a return to operations for many years to come,” Suncor’s announcement read.
The Terra Nova announcement may impact another stalled project, the $3.2 billion expansion of the White Rose oil field. Suncor Energy is a major shareholder of White Rose, about 350 km east of St. John’s, and may resume operations at this oil field as well.