Despite record profits, Suncor exec says Terra Nova subsidies 'crucial' to oil project's survival
Oil company earned $2.74 billion in the fourth quarter of 2022
The Calgary oil giant that's been making staggering profits is defending the decision to accept subsidies for the Terra Nova project in offshore Newfoundland, saying government support in 2021 was crucial to the project's survival.
"We are certainly deeply appreciative of all of the support from the provincial and the federal governments," Suncor's Shelley Powell said Friday.
"This was absolutely crucial to making sure that we were able to secure a viable path forward for the Terra Nova. It generated and maintained … 1,000-plus local long-term jobs that support the community and support this project going forward."
The Terra Nova is one of four mature oil fields in provincial offshore industry, along with Hibernia, White Rose and Hebron.
The massive floating production, storage and offloading vessel used in the field, the Terra Nova FPSO, arrived in Conception Bay this week following a transatlantic crossing from a shipyard in Spain.
The vessel has undergone a top-to-bottom overhaul, financed largely by more than $200 million in cash from a federally funded — and provincially administered — industry recovery fund that was created in late 2020, during the height of the COVID-19 pandemic. The province also agreed to forfeit future royalties valued at roughly $300 million.
The deal was reached in June 2021 after weeks of uncertainty about whether the partners involved in Terra Nova would abandon the project, which hasn't produced oil since late 2019. It also came at a time when the oil industry was reeling from a collapse in global markets as the pandemic hammered the travel industry and oil prices had cratered.
The government bailout was accompanied by an ownership shakeup in the Terra Nova, with four of the seven partners exiting, and the remaining three — Suncor, Husky (since acquired by Cenovus) and Murphy Oil — expanding their equity stakes.
The 11th-hour deal saved the Terra Nova, and it was towed to Spain more than a year ago for what's called an asset life extension, which will allow for another 10 years of production, with an estimated 80 million barrels of oil remaining in the field.
The vessel is undergoing some final work in Conception Bay and must now be inspected by regulators to make sure it can operate safely. Suncor has said it expects production to resume between April and June.
"We are all super-excited to see Terra Nova back at home in Canadian waters," said Powell, who acknowledged schedule and budget setbacks for the overhaul.
"As this work progresses, you find things that maybe you hadn't planned for and they just take time. We wanted to make sure we were doing all the things necessary that so when the vessel goes back into the field, and into production, we're confident in its ability to operate safely and reliably."
The economic landscape has changed dramatically since the government bailout for the Terra Nova was finalized, and oil companies like Suncor are now reaping unprecedented profits because of higher oil prices. Suncor reported this week, for example, that it earned $2.74 billion in the fourth quarter of 2022.
Newfoundland and Labrador's energy minister, Andrew Parsons, told The Canadian Press, "It's enough to make you ball up your fists."
He added, "It's frustrating when you're hearing about how a project might die, and then they roll out a multibillion-dollar profit. But that's the nature of it. We have to find a way to do business with them."
Suncor is the only oil company with an ownership interest in all four offshore fields. Shelley Powell said the company is deeply committed to the province.
"It is a key component of our exploration and production strategy," she said.
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